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16. Which of the following would be a good reason to add (long-term) Treasury bonds...

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16. Which of the following would be a good reason to add (long-term) Treasury bonds to a portfolio that consists entirely of stocks? (a) The bonds have very high expected returns, so investors could earn higher returns than they could with just stocks (b) The high volatility of bonds results in the possibility of very high returns relative to stocks alone (c) Treasury bonds have a higher Sharpe ratio than stocks (d) Long-term Treasury bonds are essentially risk-free (e) Treasury bonds' low correlation with stocks makes them a good diversifier 17. You are advising a pension fund who is required to have a portfolio risk of 5%. Which of the following would be the portfolio optimization problem for constructing their fund? (a) Not enough information (b) Maximize the Sharpe ratio with no additional constraints (c) Minimize the risk needed to get their long-term return target (d) Maximize return subject to a constraint that portfolio volatility is 5% (e) None of the above

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