Consider the possible portfolios that can be constructed from a risky bond that has an expected return of 7% with a standard deviation of 5% and a stock that has an expected return of 12% with a standard deviation of 12%. Which of the following statements is incorrect and why?

Group of answer choices

Lower correlation coefficients between the returns on the stock and bond will make portfolios with more favorable risk-return tradeoffs feasible.

The safest investment that we can hold will always be a portfolio consisting only of the bond.

Holding positive amounts of each risky asset in a portfolio will result in a portfolio standard deviation that is less than 12%.

The optimal portfolio of the stock and bond will be the one with the highest Sharpe ratio.