The expected return of the sum of two investments will be equal to the sum of the expected returns of the two investments plus twice the covariance between the investments.

Question

Quizplus · Accepted Answer

The expected return of the sum of two investments is equal to the sum of the expected returns of the two investments, not including any terms for covariance. Covariance affects risk, not the expected return.

The Expected Return of the Sum of Two Investments Will