Ted believes that he currently owns a portfolio which is adequately diversified. If he is correct, the addition of a _____ asset to the portfolio will have minimal, if any, effect on the portfolio's _____.

A) risk-free; beta
B) risk-free; rate of return
C) risky; rate of return
D) risky; beta
E) risky; standard deviation

Risk-free Asset

An investment with a guaranteed return and no risk of financial loss, often exemplified by government bonds.

Adequately Diversified

A portfolio strategy minimizing risk by investing in a wide variety of assets, ensuring that the performance of one investment does not dramatically impact overall portfolio performance.

Portfolio's Beta

A measure of the volatility, or systemic risk, of a portfolio in comparison to the market as a whole.