As We Add More Uncorrelated Stocks to a Portfolio Where

question 100

Multiple Choice

As we add more uncorrelated stocks to a portfolio where the stocks are held in equal weights,the benefit of diversification is most dramatic:

• A)after 20 stocks have been added.
• B)when there are more than 500 stocks.
• C)when there are more than 1000 stocks.
• D)at the outset.
• E)when there are more than 100 stocks.

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Definitions:

Required Rate

The minimum return that investors expect to earn from their investment, essentially setting a benchmark for the performance of an investment.

Net Present Value

A financial metric used to evaluate the profitability of an investment, calculating the difference between the present value of cash inflows and outflows over a period of time.

Rotating Magnetic Field

A magnetic field that rotates in space within electrical machinery, used to generate rotating mechanical force.

Stationary Windings

Fixed coils of wire in an electric motor or generator that contribute to magnetic field production when current flows through them.