Which One of These Statements Is Correct Concerning Expected and Unexpected

question 50

Multiple Choice

Which one of these statements is correct concerning expected and unexpected returns?

• A) Total return is equal to the expected return.
• B) The unexpected return is solely related to unsystematic risk.
• C) The unexpected return is solely related to systematic risk.
• D) The unsystematic portion of the surprise component of a return is diversifiable risk.
• E) Total return is equal to the expected return minus the surprise.

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Definitions:

Portfolio Expected Return

The weighted average of the expected returns of the assets in an investment portfolio.

Equal Investment

A strategy where equal amounts of capital are allocated to each investment within a portfolio.

Stocks

Shares of ownership in a company that represent a claim on part of the company's earnings and assets.

Payoff

The return or outcome received from an investment or decision, which can be positive (profit) or negative (loss).