If a Large Number of Diverse Securities Are Added to a Portfolio

question 52

Multiple Choice

If a large number of diverse securities are added to a portfolio comprised of three stocks,then the:

• A)weighted average expected return goes to zero.
• B)weighted average of the factor betas goes to zero.
• C)weighted average of the unsystematic risk goes to zero.
• D)return of the portfolio must equal the market rate of return.
• E)return of the portfolio will equal the risk-free rate.

---

Definitions:

Price Level

The cumulative average pricing for goods and services across various industries within the economy.

Purchasing Power Parity

An economic theory that compares the relative value of different currencies based on the purchasing power of various goods and services, aiming to measure the real exchange rate.

Peso

The currency used in several countries including Mexico and the Philippines, symbolized by the "$" sign or "₱".

Demand for US Dollar

The desire or need by individuals, businesses, and governments worldwide to hold assets in U.S. dollars, influenced by economic stability and interest rates.