Which of the Following Is Correct

question 43

Multiple Choice

Which of the following is correct?

• A) Investors can reduce the risk in their portfolio by investing in international stocks since they tend to have low correlation with our own stock market.
• B) Combining both stocks and bonds will likely reduce risk in a portfolio because the two assets have low correlation.
• C) Your optimal portfolio is an efficient portfolio with your desired risk level.
• D) All of the statements are correct.

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Definitions:

Net Present Value

A financial metric used to evaluate the profitability of an investment or project, calculated by subtracting the initial investment from the present value of future cash flows.

Internal Rate Of Return

The discount rate at which the net present value of an investment project is zero; the rate of return promised by a project over its useful life.

Discount Rate

The rate of interest employed to calculate today's value of anticipated future cash streams in discounted cash flow evaluation.

Discount Rate

An interest rate used to discount future cash flows to their present value, often applied in capital budgeting and investment valuation.