As the number of stocks in a portfolio is increased:
A) Unique risk decreases and approaches to zero
B) Market risk decreases
C) Unique risk decreases and becomes equal to market risk
D) Total risk approaches to zero

Question

Quizplus · Accepted Answer

Unique risk, also known as unsystematic risk, decreases and approaches zero as the number of stocks in a portfolio increases due to diversification. Market risk, or systematic risk, remains constant regardless of the number of stocks.

As the Number of Stocks in a Portfolio Is Increased