The Expected Return of a Two-Asset Portfolio Is Equal to the Product

question 64

True/False

The expected return of a two-asset portfolio is equal to the product of the weight assigned to the first asset and the expected return of the first asset plus the product of the weight assigned to the second asset and the expected return of the second asset.

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Definitions:

Decision Tree Analysis

A graphical representation that uses branching methods to illustrate every possible outcome of a decision, helping to choose the best option.

Certainty Equivalent Approach

A financial analysis method that adjusts uncertain cash flows to reflect the risk-free cash flow an investor would accept in place of taking a risk.

Cost Of Capital

The earnings rate a firm must achieve on its investment endeavors to preserve its market value and draw in capital.

Discount Rate

In discounted cash flow analysis, it's the rate of interest used to determine today's value of cash flows expected in the future.