The expected rate of return of a portfolio of risky securities is _________.
A) the sum of the securities' covariances
B) the sum of the securities' variances
C) the weighted sum of the securities' expected returns
D) the weighted sum of the securities' variances

Question

Quizplus · Accepted Answer

The expected rate of return of a portfolio of risky securities is the weighted sum of the securities' expected returns. This means that each security's expected return is multiplied by its weight in the portfolio and the results are added together. The variances and covariances of the securities are important considerations for measuring portfolio risk, but they are not used to calculate the portfolio's expected rate of return.

The Expected Rate of Return of a Portfolio of Risky