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:

Commission

A fee paid to an agent or employee for transacting a piece of business or performing a service.

Purchasing Power

The real value of money, reflecting how much goods or services one unit of money can buy.

Period

A length or portion of time, often defined for specific calculations or measurements.

Ratio

A quantitative relationship between two numbers showing how many times one value contains or is contained within the other.