Final answer:
Option C) Provide a benchmark for total return on the portfolio is indicative of a sound investment strategy. However, options A) and B) may either be too restrictive or involve higher risks, potentially compromising the investment goals. Effective strategies typically include diversification and risk management principles.
Step-by-step explanation:
A sound investment strategy is characterized by the ability to meet investment goals, manage risk, and understand the potential returns of different financial assets. Option C) Provide a benchmark for total return on the portfolio is indicative of a sound investment strategy because it suggests the presence of a clear standard against which the performance of the portfolio can be measured, which is essential for assessing both risk and return.
On the other hand, options A) and B) are somewhat restrictive or potentially too aggressive. Option A) Prohibit investments in derivatives might protect investors from complex and potentially risky financial instruments, but prohibitions can also limit flexibility in a portfolio. Option B) Maximize the portfolio return by investing general obligation bond proceeds solely in the highest yielding investments may entail significantly higher risk, which could be detrimental when those funds are needed for specified purposes, like construction expenditures. Diversification is a key strategy advised by financial experts to mitigate risks associated with investing in individual companies or financial assets.