You Are Assigned the Task of Computing the Expected Return

question 97

Multiple Choice

You are assigned the task of computing the expected return on a portfolio containing several individual stocks.Which one of the following statements is correct concerning this task?

• A)The expected rate of return on the portfolio must be positive.
• B)The arithmetic average of the betas for each security held in the portfolio must equal 1.0.
• C)The portfolio beta must be 1.0.
• D)The summation of the return deviation from the portfolio expected return for each economic state must equal zero.
• E)The standard deviation of the portfolio must equal 1.0.

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Definitions:

Econometrics

The application of statistical and mathematical methods in the field of economics to test hypotheses and forecast future trends.

Economic Theory

A set of principles and frameworks for analyzing how resources are distributed and consumed, and how economies function.

Preliminary Reading

The initial reading conducted on a topic, often before a detailed study, to gain a basic understanding or overview of the subject.

Thesis Statement

A concise summary of the main point or claim of an essay or research paper, usually one sentence that presents the author's argument or central point.