Final answer:
The incorrect statement about corporate bonds is that it's harder to diversify non-systematic risks of bonds as compared to stocks. Diversification can reduce both types of risks across a portfolio. Bonds can default, but risk can be mitigated through diversification, not completely removed.
Step-by-step explanation:
The question pertains to corporate bonds and their risk characteristics. The statement that is not true about corporate bonds is option B: It's harder to diversify non-systematic risks of bonds as compared to stocks. In fact, both stocks and bonds can have non-systematic risks diversified away through a strategy known as diversification. This involves spreading investments across a wide range of companies or asset classes, thus reducing the impact of any single company's performance on the overall portfolio.
Contrary to the given incorrect statement, diversification can cancel out extreme increases and decreases in value for both bonds and stocks. While it's true that bonds can have a limited upside and don't typically default independently (thereby are correlated in their risk to some degree), the systematic risks associated with bonds, such as changes in interest rates, can indeed be diversified away.
It is also worth noting that bond returns are typically less volatile than those of stocks, and they can offer more predictable streams of income. However, corporate bonds can and do default, which is a risk that can be mitigated but not entirely eliminated through diversification.