Homework: Homework 7_Chapter 8 Save Fina score: 0 of 2 pts My Co P8-17 (similar

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Homework: Homework 7_Chapter 8 Save Fina score: 0 of 2 pts My Co P8-17 (similar to) Cours News! calculated values are shown in the folowing table: Assig a. Plot the date from the table on a graph that has the number of securities on the x-axis and the portfolio standard deviation on the y-axis. | 50f 5 (0 complete) Hw Score: 0%, 0 of 10 pts Quest on Help * Total, nondiversifiable, and diversifiable risk David Tabot randomly selected securities from all those listed on the New York Stock Exchange for his portfolio. He began with a single securty and added securities one by one until a total of 20 securties were held in the portfolo. After each security was added, David calculated the portfollo standard deviation, . The b. Divide the total portolio risk in the graph intoits nondiversifable and diversifable risk components, and label each of these on the graph c. Describe which of the two risk components is the relevant risk, and explain why it is relevant. How much of this risk exists in David Taibot's portfolilo? a. and b. Which of the following graphs represents the portdolio risk data given above? (Select the best answer below. O A. Resul 20 12- 12 6Nondiversifiable Risk Nondiversifiable Risk 2- Diversifiable Risk Diversifiable Risk ynan Click to select your answer and then click Check Answer Clear All ^ Type here to search

Explanation / Answer

Diversifiable risk decreases as the no. of securities increase in the portfolio. A well diversified portfolio like S&P500 only has non-diversified risk or market risk.

Figure D demonstrate the concept correctly.

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