If You Randomly Select Stocks and Add Them to Your

question 46

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.

---

Definitions:

Feasibility Study

An analysis or investigation into the viability of a project or idea, considering factors such as cost, risk, and potential outcomes.

Systematic Assessment

A structured approach to evaluating or analyzing a process, person, or system based on established criteria or benchmarks.

Specified Objective

A clearly defined goal or target that an individual or group aims to achieve.

Purchase-Of-Service Agreement

A contract between a funding source (like a government agency) and a service provider, where the provider agrees to offer specified services to clients for a set fee.