What is the portfolio variance if 30% is invested in share S and 70% is invested in share T?
$\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad$Returns if
$\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad$State Occurs
$\begin{array}{|l|l|l|l|}
\hline \text { State of Economy } & \text { Probability of State of Economy } & \text { ShareS } & \text { Share T } \
\hline \text { Boom } & 40 \% & 12 \% & 20 \% \
\hline \text { Normal } & 60 \% & 6 \% & 4 \% \
\hline
\end{array}$
A).002220
B).004056
C).006224
D).008080
E).098000

Question

Quizplus · Accepted Answer

The portfolio variance is calculated using the formula: $ \sigma^2 = w_S^2 \sigma_S^2 + w_T^2 \sigma_T^2 + 2w_Sw_T \sigma_{S,T} $, where $ w_S $ and $ w_T $ are the weights of shares S and T, and $ \sigma_S^2 $, $ \sigma_T^2 $, and $ \sigma_{S,T} $ are the variances and covariance. Calculating these values from the given data results in a portfolio variance of 0.004056.

What Is the Portfolio Variance If 30% Is Invested in Share