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By incrementally adding securities to a portfolio

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By incrementally adding securities to a portfolio

By incrementally adding securities to a portfolio
A) you can reduce portfolio risk only if the new security is uncorrelated with the others in the portfolio.
B) you raise portfolio risk since having more securities in a portfolio increases the likelihood that one of them will become worthless.
C) you may reduce portfolio risk, even if new securities are not negatively correlated with others in the portfolio.
D) you may eliminate all risk with about 15 different stocks in a portfolio.
E) you reduce risk at an increasing rate.

Textbook

Corporate Finance Online

Edition: 1^st

Authors: Eakins, McNally

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More solutions for this book are available here

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