An Expected Return from a Portfolio

question 39

Multiple Choice

An expected return from a portfolio

• A) can be calculated more accurately than the expected return from any of the securities in the portfolio.
• B) will lie somewhere between the highest and lowest expected returns from securities in the portfolio.
• C) cannot be computed if there are fewer than three securities in the portfolio.
• D) will exceed the highest expected return from any of the securities in the portfolio.
• E) will be lower than the expected return from the security in the portfolio with the lowest yield because portfolios have less risk than individual securities.

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Definitions:

Cost Method

An accounting method in which investments are recorded at their original purchase cost, without recognizing changes in market value.

Par Value

The nominal or face value of a bond, share of stock, or coupon as indicated on a certificate or instrument.

Par Value

The nominal or face value of a bond, stock, or coupon as stated by the issuer, which is typically not indicative of its market value.

Stated Value

A nominal value assigned by a company to its issued shares, which may be above or below the market value.