Which One of the Following Statements Is Correct Concerning Asset

question 93

Multiple Choice

Which one of the following statements is correct concerning asset allocation?

• A)Because there is an ideal mix, all investors should use the same asset allocation for their portfolios.
• B)The minimum variance portfolio will have a 50/50 asset allocation between stocks and bonds.
• C)Asset allocation affects the expected return but not the risk level of a portfolio.
• D)There is an ideal asset allocation between stocks and bonds given a specified level of risk.
• E)Asset allocation should play a minor role in portfolio construction.

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Definitions:

Net Present Value

Net present value is a financial metric that calculates the value of a series of cash flows by discounting them back to their present value using a specific rate.

Fixed Assets

Long-term tangible assets that are used in the operations of a business and not expected to be converted into cash in the short term, like buildings, machinery, and land.

Tax Shield Approach

A method of reducing taxable income through allowable deductions such as depreciation, resulting in lower tax payments.

Operating Cash Flow

The cash generated from normal business operations, indicating a company's ability to generate sufficient revenue to maintain and grow its operations.