You Currently Have a Portfolio Comprised of 70 Percent Stocks

question 45

Multiple Choice

You currently have a portfolio comprised of 70 percent stocks and 30 percent bonds.Which one of the following must be true if you change the asset allocation?

• A) The expected return will remain constant.
• B) The revised portfolio will be perfectly negatively correlated with the initial portfolio.
• C) The two portfolios could have significantly different standard deviations.
• D) The portfolio variance will be unaffected.
• E) The portfolio variance will most likely decrease in value.

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Definitions:

Componential

In the context of intelligence theories, componential refers to the analytical aspect of intelligence which encompasses the ability to analyze, evaluate, and compare information.

Experiential

Relating to or derived from experience; emphasizing the importance of personal experience in the acquisition of knowledge.

Contextual

Pertaining to or depending on the context of a situation, event, or concept, affecting its understanding and interpretation.

Intelligence

The ability to acquire, understand, and apply knowledge and skills, and to adapt to new situations.