Ted believes that he currently owns a portfolio which is adequately diversified. If he is correct, the addition of a _____ asset to the portfolio will have minimal, if any, effect on the portfolio's _____.
A) risk-free; beta
B) risk-free; rate of return
C) risky; rate of return
D) risky; beta
E) risky; standard deviation

Question

Quizplus · Accepted Answer

In a well-diversified portfolio, the addition of a risky asset will have minimal impact on the portfolio's standard deviation, as the unsystematic risk is already minimized.

Ted Believes That He Currently Owns a Portfolio Which Is