Randomly adding securities to a portfolio will most likely:
A) reduce its risk and increase its expected return.
B) reduce its risk and decrease its expected return.
C) increase its risk and increase its expected return.
D) reduce its risk and keep its expected return unchanged.

Question

Quizplus · Accepted Answer

Randomly adding securities to a portfolio generally reduces risk through diversification, while the expected return remains unchanged unless the added securities have different expected returns.

Randomly Adding Securities to a Portfolio Will Most Likely