As We Add More Uncorrelated Stocks to a Portfolio Where

question 101

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 1,000 stocks
• D) at the outset

---

Definitions:

Indifference Curve

A graph representing combinations of goods or services between which a consumer is indifferent, showing preference levels.

Marginal Utilities

The added enjoyment or usefulness a consumer gets upon consuming an extra unit of a good or service.

Marginal Utility

The additional gain in enjoyment or utility that an individual experiences from consuming one more unit of a good or service.

Indifference Curve

A graphical representation in economics of all combinations of goods that provide a consumer with the same level of satisfaction or utility.