Business College

A client with a portfolio of 10 U.S corporate bonds is planning to add 10 more bonds of different corporations (both U.S and international) which one of the following could the client eliminate through diversification?

Answers

Answer 1

Answer:

Explanation:

Diversification in a portfolio involves reducing risk by investing in a variety of assets. The specific bonds that could be eliminated through diversification would depend on the characteristics of the existing portfolio and the new bonds being considered.

Without information about the current holdings and the characteristics of the new bonds, it is not possible to determine which specific bond(s) could be eliminated through diversification. However, diversification generally aims to reduce the exposure to any single issuer or industry, and spread the risk across different assets. So, the client could eliminate bonds from issuers or industries that are already well-represented in the portfolio to achieve better diversification.

It is important to note that specific investment decisions should be based on thorough analysis of individual bonds, including creditworthiness, maturity, interest rates, and other factors. Professional financial advice and analysis should be sought to make informed investment decisions.

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