In General, the ________ the Proportion of Your Portfolio That

question 47

Multiple Choice

In general, the ________ the proportion of your portfolio that is allocated to bonds, the ________ will be your portfolio's overall risk.

• A) larger; lower
• B) smaller; lower
• C) larger; higher
• D) None of the above.

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Definitions:

Asset Allocation

Asset allocation is an investment strategy that aims to balance risk and reward by apportioning a portfolio's assets according to an individual's goals, risk tolerance, and investment horizon.

Information Ratio

A ratio used to measure the return of a portfolio or fund relative to its risk, often used to assess the skill of a portfolio manager.

Risk-Free Return

The theoretical return attributed to an investment with zero risk, typically associated with government bonds.

Jensen Portfolio

A portfolio evaluated using Jensen's Alpha, which measures the excess return of the portfolio over the predicted return by the CAPM model for its level of risk.