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:

Internal Rate Of Return

A financial metric used to evaluate the profitability of an investment, representing the discount rate that makes the net present value of all cash flows from the investment zero.

Present Value

The value now of a future monetary sum or cash flows, considering a specified rate of return.

Desired Rate

A target interest rate that an individual or entity seeks to achieve on an investment.

Income Tax

Taxes imposed by governments on the income generated by businesses and individuals within their jurisdiction.