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

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.

Question Of The Week - Portfolio Management (3) - CFA Level 1

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- AdaptPrep
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  18 Jul 2018 at 8:04 am
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  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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