14. You can reduce your investment risk most effectively through a) asset allocation. bj limiting the time horizon. c) diversifying stocks. d) maximizing the beta. 15. Allocating some of your assets to bonds will reduce the level of risk in your portfolio because: (Select the best answer below.) a) returns from investing in stocks multiplied by the returns from investing in bonds is the risk index. bj returns from investing in stocks and the returns from investing in bonds are not correlated. c) returns from investing in stocks and the returns from investing in bonds are not highly correlated. dj returns from investing in stocks and the returns from investing in bonds are highly correlated. 16. A bond is a a) long-term debt security only issued by government agencies. bj long-term debt security issued by government agencies and corporations. c) short-term debt security issued by government agencies and corporations. d) short-term debt security only issued by corporations, 17. The par value of the bond is a) the amount that will be returned to the investor at maturity. b) the periodic income payment. c) the difference between the purchase price and the sale price. dj the rate of interest on the bond. 18. If an investor buys a bond below par value and holds it to maturity, he will earn a return that is a) more than he would earn if he invested that amount in stocks. b) less than he would carn if he sold it before maturity. c) equal to the coupon payments. d) the difference between the par value and the amount paid. 19. A call feature on a bond allows the bond issuer to a) sell the bond to another investor before maturity. by buy back the bond from the investor before maturity. c) sell the bond to another investor at maturity. d) buy back the bond from the investor at maturity. FINAL EXAM FACE! 175 - Isdeduction to Finance