When Bonds Are Initially Added to an All-Equity Portfolio the

question 63

Multiple Choice

When bonds are initially added to an all-equity portfolio the

• A) level of risk of the portfolio is impacted more than the rate of return.
• B) rate of return on the portfolio is impacted more than the level of risk.
• C) level of risk and the rate of return are equally impacted.
• D) rate of return is not impacted but the level of risk is lowered.

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Definitions:

Installment Accounts Receivable

Refers to the money owed to a company that will be paid back in regular, periodic payments.

Term Loans

Loans from financial institutions that are repaid over a set period of time with scheduled payments.

Personal Guarantees

A commitment by an individual to repay a debt if the original borrower defaults, often required in business loans.

Joint and Severable

A legal term indicating that all parties in a contract are equally responsible for fulfilling the terms of the agreement, and each can be held fully accountable.