An Increase in the Number of Corporations in a Portfolio

question 6

Multiple Choice

An increase in the number of corporations in a portfolio from 1 to 10 reduces

• A)market risk by more than an increase from 110 to 120.
• B)market risk by less than an increase from 110 to 120.
• C)firm-specific risk by more than an increase from 110 to 120.
• D)firm-specific risk by less than an increase from 110 to 120.

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Definitions:

Threshold

The point at which a stimulus is strong enough to detect or produce a response.

Candle Flame

The visible, luminous part of a candle fire, which emits light as a result of combustion.

Night

The period of time between sunset and sunrise, characterized by darkness due to the absence of direct sunlight.

Wavelengths

Wavelengths refer to the distance between successive crests of a wave, especially points in a sound wave or electromagnetic wave.