The expected return of a two asset portfolio with a correlation coefficient of .35 will be _______________ the weighted average expected return of the portfolio.
A) below
B) above
C) equal to
D) None of the options are correct

Question

Quizplus · Accepted Answer

The expected return of a two-asset portfolio is calculated as the weighted average of the expected returns of the individual assets, regardless of their correlation coefficient. The correlation affects the portfolio's risk, not its expected return.

The Expected Return of a Two Asset Portfolio with a Correlation