The Expected Return on a Portfolio

question 107

Multiple Choice

The expected return on a portfolio:

• A)can be greater than the expected return on the best performing security in the portfolio.
• B)can be less than the expected return on the worst performing security in the portfolio.
• C)is independent of the performance of the overall economy.
• D)is limited by the returns on the individual securities within the portfolio.
• E)is an arithmetic average of the returns of the individual securities when the weights of those securities are unequal.

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Definitions:

Investment Banks

Firms that assist in the design of an issuing firm’s corporate securities and in the sale of the new securities to investors in the primary market.

Public Trading Companies

Corporations whose shares are listed and traded on public stock exchanges, making their ownership publicly accessible.

Adequate Capital

Sufficient funds required by a business to finance its operations and meet its obligations without facing financial distress.

Bank Run

A situation where a large number of a bank's customers try to withdraw their deposits simultaneously because they believe the bank might fail.