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If the Returns on Different Assets Are Uncorrelated

Question 2

Multiple Choice

If the returns on different assets are uncorrelated:


A) an increase in the number of assets in a portfolio may bring the standard deviation of the portfolio close to zero.
B) there will be little gain from diversification.
C) diversification will result in risk averaging but not in risk reduction.
D) the expected return on a portfolio of such assets should be zero.

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