Investing in a diversified portfolio of stocks guarantees that you won't lose money with your investments. True False
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Diversification involves spreading investments across various stocks or asset classes to reduce risk. Show more…
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21. Portfolio A has but one security, while Portfolio B has 100 securities. Because of diversification effects, we would expect Portfolio B to have the lower risk. However, it is possible for Portfolio A to be less risky. True or False 22. The realized return on a stock portfolio is the weighted average of the expected returns on the stocks in the portfolio. True or False 23. The price sensitivity of a bond to a given change in interest rates is generally greater the longer the bond's remaining maturity. True or False 24. The tighter the probability distribution of its expected future returns, the greater the risk of a given investment as measured by its standard deviation. True or False 25. Sinking funds are provisions included in bond indentures that require companies to retire bonds on a scheduled basis prior to their final maturity. Many indentures allow the company to acquire bonds for sinking fund purposes by either (1) purchasing bonds on the open market at the going market price or (2) selecting the bonds to be called by a lottery administered by the trustee, in which case the price paid is the bond's face value. True or False
Bryan K.
investment A guarantees its holder $100 return. Investment B earns $0 or $200 with equal chances (i.e., an average of $100) over the same period. Both investments have equal risk. True or False
Dr. C D.
Christopher D.
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