Question

Bob holds a portfolio of 20 stocks from different industries, whereas Sharon holds only one stock in her portfolio. Assuming they each add a stock to their portfolio, which of the following is most likely? Relative to Bob’s portfolio, Sharon’s portfolio will experience the _________.a. larger increase in total risk. b. larger increase in return. c. larger decrease in total risk d. larger decrease in market risk.

Answer 1

Answer:

The correct answer is: C. larger decrease in total risk.

Explanation:

The risk of an investment portfolio refers to the possibilities of obtaining the return, profit or profit you expect. Every investment involves a risk, and the more you can earn, the greater the risk. If you put your money on a fixed term, the risk is minimal, but it hardly gives you an interest even less than inflation. If you invest in the forex market, for example, you can earn a lot of money, but also the risk (that you do not achieve and even that you lose what you invested) is much greater. Every investor knows that he must assume some risk, because it is something inherent in the investment.