Final answer:
The option that is least likely to reduce the unsystematic risk of a portfolio is a. Reducing the number of stocks held in the portfolio. Diversification across asset classes, industries, and geographies helps mitigate unsystematic risk, while reducing the number of stocks concentrates risk. Option A is correct.
Step-by-step explanation:
The answer to the question Which one of the following is least apt to reduce the unsystematic risk of a portfolio? is option a. Reducing the number of stocks held in the portfolio. Unsystematic risk is specific to a single company or industry, and this form of risk can be mitigated through diversification, which essentially means spreading investments across different sectors, asset classes, and geographic regions.
Options b, c, d, and e all contribute to diversification. For instance:
Adding bonds to a stock portfolio (option b) mixes asset classes and can lower overall portfolio volatility.
Incorporating international securities into a portfolio of U.S. stocks (option c) introduces geographic diversification, which can reduce risks pertaining to a single country's economy or market.
Adding technology stocks to a portfolio of industrial stocks (option d) diversifies across industry sectors, which may have different economic cycles.
Introducing U.S. treasury bills to a risky portfolio (option e) adds highly secure assets, reducing the risk profile of the overall portfolio.
Conversely, reducing the number of stocks in a portfolio, would likely increase unsystematic risk, as it concentrates the investment and reduces the benefits of diversification.