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:

Language Acquisition Device

A hypothetical tool in the brain that enables infants to acquire and understand language rapidly as part of their innate biological endowment.

Reinforcement

In psychology, a consequence applied that strengthens an organism's future behavior whenever that behavior is preceded by a specific antecedent stimulus.

Shaping

A psychological conditioning technique where successive approximations of a desired behavior are reinforced.

Heuristic

A problem-solving approach using practical methods or shortcuts to generate solutions that are not guaranteed to be optimal.