Investments, tenth edition

     1.   The expected return of a portfolio is the weighted average of the component security expected 

returns with the investment proportions as weights.  

    2.   The variance of a portfolio is the weighted sum of the elements of the covariance matrix with the 

product of the investment proportions as weights. Thus the variance of each asset is weighted by 

the square of its investment proportion. The covariance of each pair of assets appears twice in the 

covariance matrix; thus the portfolio variance includes twice each covariance weighted by the 

product of the investment proportions in each of the two assets.