When We Form an Equally Weighted Portfolio of Stocks and Keep

question 50

True/False

When we form an equally weighted portfolio of stocks and keep increasing the number of stocks in the portfolio, the volatility of the portfolio also increases.

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Definitions:

Mutual Fund

Financial intermediary that pools funds from investors by selling shares of itself and uses the funds to purchase securities.

Financial Institution

An organization that provides financial services to its clients or members, such as banks, credit unions, and insurance companies.

Discount Rate

The interest rate charged by central banks on loans to commercial banks, influencing monetary policy and economic conditions.

Federal Funds Rate

The interest rate at which depository institutions lend reserves to other depository institutions overnight, crucial for monetary policy in the United States.