Adding foreign stocks and bonds to a U.S. portfolio will almost certainly _____the risk of the portfolio and can possibly _____ its average return.
A) reduce; increase
B) increase; reduce
C) increase; increase
D) decrease; decrease
E) not change; decrease

Question

Quizplus · Accepted Answer

Adding foreign stocks and bonds to a U.S. portfolio will almost certainly increase the risk of the portfolio due to currency fluctuations, political risk, and different market conditions. However, it can also possibly reduce the average return due to the same factors. Therefore, the best choice is A, as it acknowledges the increase in risk and the possible reduction in return.

Adding Foreign Stocks and Bonds to a U