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 above

Question

Quizplus · Accepted Answer

As diversification increases, unsystematic risk is reduced, and the total variance of a portfolio approaches the variance of the market portfolio, which represents systematic risk.

As Diversification Increases,the Total Variance of a Portfolio Approaches ____________