The Variance of the Sum of Two Investments Will Be

question 167

True/False

The variance of the sum of two investments will be equal to the sum of the variances of the two investments plus twice the covariance between the investments.

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Definitions:

Monopolistic Competition

A market structure characterized by many firms offering products that are similar but not identical, leading to competition on factors other than price.

Industry Entry

The process of a new company or business beginning operations in a particular market or industry.

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs, representing the true profitability of an enterprise.

Demand Schedule

A table that lists the quantity of a good that consumers are willing and able to purchase at various prices.