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.

Question

Quizplus · Accepted Answer

Adding bonds to an all-equity portfolio generally lowers the portfolio's overall risk more significantly than it affects the rate of return. This is because bonds typically have lower volatility compared to stocks and provide a steady income, thus reducing the portfolio's overall risk.

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