If You Randomly Select Stocks and Add Them to Your

question 144

Multiple Choice

If you randomly select stocks and add them to your portfolio, which of the following statements best describes what you should expect?

• A) Adding more such stocks will increase the portfolio's expected rate of return.
• B) Adding more such stocks will reduce the portfolio's beta coefficient and thus its systematic risk.
• C) Adding more such stocks will have no effect on the portfolio's risk.
• D) Adding more such stocks will reduce the portfolio's market risk but not its unsystematic risk.
• E) Adding more such stocks will reduce the portfolio's unsystematic, or diversifiable, risk.

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Definitions:

Glucose

A simple sugar and an important energy source in living organisms, also the main type of sugar in the blood.

Sodium

A chemical element with the symbol Na and atomic number 11, sodium is a soft, silvery-white, highly reactive metal that is a key component of table salt (sodium chloride).

Phenylalanine

an essential amino acid important for the biosynthesis of other proteins and amino acids in the body.

Insulin

A hormone produced by the pancreas that regulates blood sugar levels by facilitating the uptake of glucose into tissues.