=+LG 5 P8–17 Total, nondiversifiable, and diversifiable risk David Talbot randomly selected securities from all those listed on the New York Stock Exchange for his portfolio. He began with a single security and added securities one by one until a total of 20 securities were held in the portfolio. After each security was added, David calculated the portfolio standard deviation, s. The calculated values are shown in the following table.

Number of securities Std. dev., S Number of securities Std. dev., S 1 14.50% 11 7.00%

2 13.30 12 6.80 3 12.20 13 6.70 4 11.20 14 6.65 5 10.30 15 6.60 6 9.50 16 6.56 7 8.80 17 6.52 8 8.20 18 6.50 9 7.70 19 6.48 10 7.30 20 6.47 Actual return Year Market portfolio Asset A Asset B 2009 6% 11% 16%

2010 2 8 11 2011 -13 -4 -10 2012 -4 3 3 2013 -8 0 -3 2014 16 19 30 2015 10 14 22 2016 15 18 29 2017 8 12 19 2018 13 17 26