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If one were to create a portfolio by randomly picking stocks and adding them to a portfolio, as the number of stock in the portfolio

If one were to create a portfolio by randomly picking stocks and adding them to a portfolio, as the number of stock in the portfolio gets bigger and approaches infinity, the portfolios variance essentially should depend on the____________

Multiple Choice

  • variance of the first stock to enter the portfolio

  • variance of the individual stock returns

  • market risk premium

  • covariances between the stock returns in the portfolio

  • risk free rate used to construct the portfolio

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