22. Unit 7: Lesson 1: LS Assignment 3

___________ risk is reduced as more securities are added to the portfolio.

- Diversifiable - Unsystematic - Unique

As more securities are added to a portfolio, what will happen to the portfolio's total unsystematic risk?

- It may eventually be almost eliminated - It is likely to decrease

If the variance of a portfolio is 0.0025, what is the standard deviation?

5% or 0.05 SD = sqrtVAR

John's portfolio consists of $1,200 worth of Chi Corporation common stock and $400 worth of Lambda Corporation common stock. Lambda's portfolio weight is 25%, and Chi's portfolio weight is:

75% 100%-25% 0r $1,200/$1,600

If you wish to create a portfolio of stocks, what is the required minimum number of stocks?

You must invest in stocks of more than 1 corporation

What is the expected return of a portfolio consisting of Stocks A and B if the expected return is 10% for A and 15% for B? Assume you are equally invested in both the stocks.

12.5%

Which of the following types of risk is not reduced by diversification?

Systematic risk Cannot be diversified in any way

Historical return data indicates that as the number of securities in a portfolio increases, the standard deviation of returns for the portfolio:

declines

Systematic risk will _______ when securities are added to a portfolio.

not change