When Shares with the Same Expected Return Are Combined into a Portfolio

question 31

Multiple Choice

When shares with the same expected return are combined into a portfolio:

• A)the expected return of the portfolio is less than the weighted average expected return of the shares.
• B)the expected return of the portfolio is greater than the weighted average expected return of the shares.
• C)the expected return of the portfolio is equal to the weighted average expected return of the shares.
• D)there is no relationship between the expected return of the portfolio and the expected return of the shares.
• E)None of the above.

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Definitions:

Capital

The wealth, either financial or physical, that is used by a business to produce goods or services.

Income Summary

An account in which the revenues and expenses are temporarily recorded to calculate the net income or loss for a period, before transferring to the capital account.

Capital

Refers to the financial assets or resources that individuals or businesses have available to invest or spend on building and growing their operations.

Expense Account(s)

Accounts used to record the costs incurred in the operation of a business, such as rent, utilities, and salaries, which are used to calculate net income.