The Expected Return of the Sum of Two Investments Will

question 72

True/False

The expected return of the sum of two investments will be equal to the sum of the expected returns of the two investments plus twice the covariance between the investments.

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Definitions:

Treasury Bond

Long-term, fixed-interest U.S. government debt securities with maturities over ten years, considered low-risk investments.

Futures Contract

A contractual agreement regulated by law, specifying the sale or purchase of an item at a fixed price, to be executed at a later date.

Spot Price

The immediate market value at which certain assets, like commodities, currencies, or securities, are available for purchase or sale with instant delivery.

Liquidate

The process of converting assets into cash or equivalent by selling them, often used in the context of closing a business or paying off debts.