What Should You Expect to Happen If You Randomly Select

question 101

Multiple Choice

What should you expect to happen if you randomly select stocks and add them to your portfolio?

• A)This will reduce the portfolio's unsystematic, or diversifiable, risk.
• B)This will increase the portfolio's expected rate of return.
• C)This will reduce the portfolio's beta coefficient and thus its systematic risk.
• D)This will have no effect on the portfolio's risk.

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Definitions:

Fixture

A piece of property that was originally moveable but has become attached to real property in such a way that it is legally considered part of the real property.

Subrogation

is a legal doctrine allowing one party (usually an insurer) to step into the shoes of another party to pursue rights or claims against a third party, often to recover amounts paid out in a claim.

Surety

A form of financial guarantee, wherein one party (the surety) agrees to take on the financial obligations of another if they default.

Reimbursement

The act of compensating someone for an expense incurred, often associated with business expenses or insurance claims.