Question

The largest reduction in a portfolio's risk is achieved when the number of stocks in the portfolio is increased from

Select one:
a.10 to 20.
b.1 to 10.
c.80 to 100.
d.40 to 80.

Answer 1

The largest reduction in a portfolio's risk is achieved when the number of stocks in the portfolio is increased from 10 to 20.

Step-by-step explanation:

The largest reduction in a portfolio's risk is achieved when the number of stocks in the portfolio is increased from 10 to 20. Diversification can offset some of the risks of individual stocks rising or falling. By increasing the number of stocks in a portfolio, the impact of any single stock's performance on the overall portfolio becomes relatively smaller. This helps to diversify the risk and reduce the potential for significant losses caused by the poor performance of a single stock.