Which One of the Following Is Least Apt to Reduce

question 104

Multiple Choice

Which one of the following is least apt to reduce the unsystematic risk of a portfolio?

• A)reducing the number of stocks held in the portfolio
• B)adding bonds to a stock portfolio
• C)adding international securities into a portfolio of U.S. stocks
• D)adding U.S. Treasury bills to a risky portfolio
• E)adding technology stocks to a portfolio of industrial stocks

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Definitions:

Systematic Risk

The risk inherent to the entire market or a whole market segment, which cannot be mitigated through diversification alone.

Opportunity Sets

The array of possible investment opportunities or combinations that are available to an investor.

Systematic Risk Principle

A principle stating that investors need to be compensated for taking on increased levels of undiversifiable risk.

Not Correlated Stocks

Stocks whose price movements are independent of each other, indicating no direct relationship in their performance.