As diversification increases, the total variance of a portfolio approaches
A)0.
B)1.
C)the variance of the market portfolio.
D)infinity.
E)None of the options

Name: As diversification increases, the total variance of a portfolio approaches A)0. B)1. C)the variance of the market portfolio. D)infinity. E)None of the options
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Question

Quizplus · Accepted Answer

As more and more securities are added to the portfolio, unsystematic risk decreases and most of the remaining risk is systematic, as measured by the variance of the market portfolio.

As Diversification Increases, the Total Variance of a Portfolio Approaches