Which of the Following Is Incorrect

question 3

Multiple Choice

Which of the following is incorrect?

• A) It is possible to combine assets that all move in the exact same fashion over time and gain the benefits of diversification.
• B) Adding long-term Treasury bonds to a stock portfolio will reduce the risk of the portfolio.
• C) The optimal portfolio provides the highest return for the investor's desired risk.
• D) All of these choices are correct.

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Definitions:

Straight-Line Method

An approach to depreciation that divides the cost of an asset evenly over its expected lifespan, resulting in the same depreciation expense annually.

Annual Interest Expense

The total cost incurred by a borrower in a year for all debts, represented as the interest payments made on any borrowed funds.

Bond Discount

The difference between the face value of a bond and its selling price when the bond is sold for less than its face value.

Premium

The amount paid for an insurance policy, or the amount by which a bond or stock sells above its par or face value.