As Diversification Increases, the Total Variance of a Portfolio Approaches

question 50

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 options are correct.

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Definitions:

Sales Budget

A financial plan that estimates the expected revenues from sales for a specific period, serving as a component of a company's overall budgeting process.

Direct Materials Purchases

The total cost of raw materials bought during a period for use in the production process.

Material A

A placeholder term often used to refer to a specific type of raw material used in manufacturing or production processes.

Direct Materials

Raw materials that can be directly attributed to the production of specific goods or services.