When shares with the same expected return are combined into a portfolio:
A)the expected return of the portfolio is less than the weighted average expected return of
The shares.
B)the expected return of the portfolio is greater than the weighted average expected return
Of the shares.
C)the expected return of the portfolio is equal to the weighted average expected return of
The shares.
D)there is no relationship between the expected return of the portfolio and the expected
Return of the shares.
E)None of the above.

Question

Quizplus · Accepted Answer

The expected return of the portfolio is equal to the weighted average expected return of the shares. This is known as the portfolio expected return formula, where the expected return of a portfolio is the weighted average of the expected returns of the individual assets in the portfolio. Therefore, the answer is C.

When Shares with the Same Expected Return Are Combined into a Portfolio