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Suppose an investor decides to limit themselves into only purchasing state and local government-issued bonds, rather than stocks and corporate bonds. What will the consequences
Suppose an investor decides to limit themselves into only purchasing state and local government-issued bonds, rather than stocks and corporate bonds. What will the consequences be?
(a) The portfolio opportunity set will remain the same as the one with the full set of investments
(b) The optimal portfolio will be risk-free
(c) The resulting capital allocation line will shift up and to the left
(d) It will result in a portfolio with lower return and greater standard deviation than if the full set of investments were considered
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