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:

Arbitrage

The process of buying and selling assets or securities across different markets or forums to profit from price differences.

Vertical Contracts

Agreements between firms at different levels of the supply chain, such as between a manufacturer and a retailer, aimed at controlling or coordinating activities.

Costly Activities

tasks or operations that require a high expenditure of resources, such as time, money, or labor.

New Product

A good, service, or idea that has not previously been brought to the market by its seller.