The statement, the expected value of ep for any well-diversified portfolio is zero, is true.
The expected return value is calculated by multiplying the weight of each asset by its expected return. Then add these values for each investment to get the total expected return for your portfolio.
By calculating the expected values, investors can choose the scenario most likely to give the desired outcome. The expected value cannot be greater than 1. As when you observe that if a random variable x is less than or equal to 1 almost surely then certainly E(X) is less than or equal to 1.
Hence, the expected value is calculated by multiplying each of the possible outcomes. So, the given statement is true.
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