You have a portfolio which is comprised of 72 percent of stock A and 28 percent of stock B.What is the variance of this portfolio?

A) 190.9
B) 203.8
C) 268.1
D) 290.9
E) 306.9

Question

You have a portfolio which is comprised of 72 percent of stock A and 28 percent of stock B.What is the variance of this portfolio?

A) 190.9 
B) 203.8 
C) 268.1 
D) 290.9 
E) 306.9

Quizplus · Accepted Answer

E(R-Boom) = (0.72 × 12%) + (0.28 × 22%) = 14.8% E(R-Normal) = (0.72 × -12%) + (0.28 × -44%) = -20.96% E(R-Portfolio) = (0.60 × 14.8) + (0.40 × -20.96) = 0.50% Var(Portfolio) = 0.60(14.8 - 0.50)² + 0.40(-21.0 - 0.50)² = 306.91

You Have a Portfolio Which Is Comprised of 72 Percent