Which of the following is true of the properties of expected returns?

Question

Quizplus · Accepted Answer

The expected return of a portfolio is the portfolio-weighted average of the expected returns. This is known as the portfolio expected return formula. A and B are both incorrect because the expected value of a constant times a return is equal to the constant times the expected return (i.e. E(aX) = aE(X)). C is also incorrect because the expected value of the sum or difference of two returns is the sum or difference between their expected returns (i.e. E(X + Y) = E(X) + E(Y) and E(X - Y) = E(X) - E(Y)).

Which of the Following Is True of the Properties of Expected