Decreasing the Number of Stocks in a Portfolio from 50

question 69

Multiple Choice

Decreasing the number of stocks in a portfolio from 50 to 10 would likely ________.

• A) increase the systematic risk of the portfolio
• B) increase the unsystematic risk of the portfolio
• C) increase the return of the portfolio
• D) decrease the variation in returns the investor faces in any one year

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Definitions:

Amortized

A process of paying off debt in regular installments over a period of time, where each payment is partially principal and partially interest.

Compounded Semi-annually

Refers to the process of calculating interest on both the initial principal and the accumulated interest from previous periods twice a year.

Amortization Schedule

A table detailing each periodic payment on an amortizing loan (typically a mortgage), as well as how much of each payment is interest versus principal and the balance remaining after each payment.

Compounded Semi-annually

Interest calculation method where interest is added to the principal sum of a loan or deposit twice a year, resulting in interest earning interest.