As Diversification Increases,the Total Variance of a Portfolio Approaches ____________

question 45

Multiple Choice

As diversification increases,the total variance of a portfolio approaches ____________.

• A)0
• B)1
• C)the variance of the market portfolio
• D)infinity
• E)none of the above

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Definitions:

Paid-in Capital

The amount of money that shareholders have invested in the company through the purchase of its stock, over and above the par value of the shares.

Par Value

The face value of a bond or stock as stated in the corporate charter, which is the minimum amount the security can be sold for upon its initial offering.

Treasury Stock

Stocks that the company originally issued and then bought back, decreasing the total number of shares available for trading on the public market.

Common Stock

Represents ownership shares in a corporation, giving holders a claim on part of the company's profits in the form of dividends and voting rights.