Risk and Return of Multiple Assets

The portfolio's expected return

The covariance machinery

Diversification and the asset count

The opportunity set and the efficient frontier

A portfolio holds 60 percent in an asset expected to return 10 percent and 40 percent in one expected to return 5 percent. What is the portfolio's expected return?

What allows a portfolio's risk to fall below the weighted average of its assets' risks?

Two stocks each have 20 percent standard deviation and are held equally, with correlation 0.3. Approximately what is the portfolio standard deviation?

Why does diversification's benefit largely flatten beyond twenty to thirty well-chosen assets?

Which statement correctly distinguishes the two risk components?

Why does the two-asset opportunity set bow toward the upper left when correlation is below one?

In the two-asset portfolio variance formula, what Greek letter names the correlation driving the cross term? Write the letter.

What two-word term names the market-wide risk that no portfolio can remove? Answer in lowercase.

What two-word term names the upper-left boundary of the opportunity set, the portfolios with the most return for each risk level? Answer in lowercase.

What two-word term names the firm-specific risk that averaging across assets cancels? Answer in lowercase.