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

question 18

Multiple Choice

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

• A) the expected return of the portfolio is less than the average expected return of the stocks.
• B) the expected return of the portfolio is greater than the average expected return of the stocks.
• C) the expected return of the portfolio is equal to the average expected return of the stocks.
• D) there is no relationship between the expected return of the portfolio and the expected return of the stocks.

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Definitions:

Trial-and-Error

A problem-solving method involving repeated attempts with the aim of finding a solution through successive failures or mistakes.

Intended Change

A change that is planned and purposefully implemented within an organization to achieve specific objectives.

Affirmative Action

A policy favoring those who tend to suffer from discrimination, especially in relation to employment or education.

Discrimination

Unjust or prejudicial treatment of individuals, often based on race, age, sex, or other characteristics.