Consider the following information: What is the variance of a portfolio invested 30 percent each in Stocks A and B and 40 percent in Stock C?
A)0.000065
B)0.000163
C)0.000289
D)0.000528
E)0.001740

Question

Consider the following information:  What is the variance of a portfolio invested 30 percent each in Stocks A and B and 40 percent in Stock C?
A)0.000065 
B)0.000163 
C)0.000289 
D)0.000528 
E)0.001740

Quizplus · Accepted Answer

E(R_Boom) = (0.30 × 0.06) + (0.30 × 0.11) + (0.40 × 0.17) = 0.119E(R_Bust) = (0.30 × 0.19) + (0.30 × -0.04) + (0.40 × 0.23) = 0.137E(R_Portfolio) = (0.72 × 0.119) + (0.28 × 0.137) = 0.12404Variance = 0.72(0.119 - 0.12404)² + 0.28(0.137 - 0.12404)² = 0.000065

Consider the Following Information: What Is the Variance of a Portfolio