Compared to a portfolio composed entirely of shares, a portfolio that is 50 per cent government bonds and 50 per cent shares will have a
A) lower return and a lower level of risk.
B) lower return and a higher level of risk.
C) higher return and a lower level of risk.
D) higher return and a higher level of risk.

Question

Quizplus · Accepted Answer

Adding government bonds to a portfolio of shares will lower the overall risk, as bonds tend to be less volatile and provide a steady income stream. However, this will also lower the overall return, as shares tend to outperform bonds over the long term. Therefore, the portfolio will have a lower return and a lower level of risk compared to a portfolio composed entirely of shares.

Compared to a Portfolio Composed Entirely of Shares, a Portfolio