Compared to a portfolio composed entirely of shares a portfolio that is 50 percent government bonds and 50 percent shares will have a ?
Correct answer: A. lower return and a lower level or risk
- A. lower return and a lower level or risk
- B. lower return and a higher level of risk
- C. higher return and a lower level or risk
- D. higher return and a higher level of risk
Explanation
Replacing some shares with government bonds normally lowers the portfolio’s expected return because bonds generally offer less return, but it also lowers risk through asset diversification. Thus both return and risk are lower.
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