The Covariance Between Two Investments of a Portfolio Is Equal

question 121

True/False

The covariance between two investments of a portfolio is equal to the sum of the variances of the investments.

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Definitions:

Cash Basis

An accounting method where revenue is recorded when cash is received, and expenses are recorded when cash is paid out.

Adjusting Entries

Journal entries made at the end of an accounting period to update account balances for accruals and deferrals that are not recorded through regular transactions.

Accruals

Accruals are accounting adjustments for revenues and expenses that have been earned or incurred but not yet recorded in accounts due to the timing of cash flows.

Prepayments

Payments made in advance for goods or services, recorded as assets on the balance sheet until the actual goods or services are received.