The risk of a portfolio declines quickly as more securities are added. Using Equation 7-8 and assuming

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The risk of a portfolio declines quickly as more securities are added. Using Equation 7-8 and assuming that each security’s standard deviation is 20 percent, the risk of a 100‐security portfolio is reduced to 2.0 percent:

20 100/2 = 2.0%

Equation 7-8

op oi 1/2 n (7-8)

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Investments Analysis And Management

ISBN: 9781118975589

13th Edition

Authors: Charles P. Jones, Gerald R. Jensen

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Question Posted: Dec 31, 2023 10:34 AM

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The risk of a portfolio declines quickly as more securities are added. Using Equation 7-8 and assuming

Question:

20 100¹/2 = 2.0%

Step by Step Answer:

Equation 78 is a simplified formula that demonstrates the principle of diversification in investment ...View the full answer

Investments Analysis And Management

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