The expected return on a portfolio is affected by the I) choice of securities held in the portfolio
II) return of each security given a particular economic state
III) portfolio weight assigned to each security
IV) probability of each economic state occurring
A) II and III
B) II and Iv
C) I, II and III
D) II, III and Iv
E) I, II, III and IV

Question

Quizplus · Accepted Answer

All of the choices are factors that affect the expected return on a portfolio. The choice of securities will affect the potential returns available, the return of each security given a particular economic state will determine the returns actually realized, the portfolio weight assigned to each security will determine the overall impact of each security's return on the portfolio, and the probability of each economic state occurring will determine the likelihood of particular returns being realized. Therefore, all of these factors are important to consider when evaluating the expected return on a portfolio.

The Expected Return on a Portfolio Is Affected by the I)