You are assigned the task of computing the expected return on a portfolio containing several individual stocks.Which one of the following statements is correct concerning this task?
A)The expected rate of return on the portfolio must be positive.
B)The arithmetic average of the betas for each security held in the portfolio must equal 1.0.
C)The portfolio beta must be 1.0.
D)The summation of the return deviation from the portfolio expected return for each economic state must equal zero.
E)The standard deviation of the portfolio must equal 1.0.

Question

Quizplus · Accepted Answer

The summation of the return deviation from the portfolio expected return for each economic state must equal zero because the expected return is a weighted average of possible returns, and deviations from this expected return will sum to zero.

You Are Assigned the Task of Computing the Expected Return