Question
When new securities are added to a portfolio, the total unsystematic risk portion of that portfolio is most likely to Blank______.
Multiple choice question.
remain constant
decrease
increase
Multiple choice question.
remain constant
decrease
increase
Answers
GPT-4o mini
When new securities are added to a portfolio, the total unsystematic risk portion of that portfolio is most likely to **decrease**.
This is because unsystematic risk, which is specific to individual securities, can be reduced through diversification. Adding more securities that are not perfectly correlated with each other helps to spread out and minimize the unsystematic risk.
This is because unsystematic risk, which is specific to individual securities, can be reduced through diversification. Adding more securities that are not perfectly correlated with each other helps to spread out and minimize the unsystematic risk.