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Up0
An analyst is given the following information:
• The standard deviation of the equal-weighted portfolio is 20%.
• The standard deviation of the randomly selected security is 25%.
The diversification ratio of the randomly selected security is closest to:- 0.25
- 0.8
- 1.25
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Up3
The diversification ratio is
calculated as the ratio of the standard deviation of the equal-weighted
portfolio to the standard deviation of the randomly selected security. Thus,
the diversification ratio is 0.20/0.25 = 0.80.
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