Use the table for the question(s)below.
Consider the following covariances between securities:
-The variance on a portfolio that is made up of a $6000 investments in Duke Energy and a $4000 investment in Wal-Mart stock is closest to:
A).050
B).045
C).051
D)-0.020

Question

Use the table for the question(s)below.
Consider the following covariances between securities: 
-The variance on a portfolio that is made up of a $6000 investments in Duke Energy and a $4000 investment in Wal-Mart stock is closest to:
A).050 
B).045 
C).051 
D)-0.020

Quizplus · Accepted Answer

B)Total invested = $6000 + $4000 = $10,000 X_Duke = 11ea7cce_3d1f_9b53_928c_b10e6660cc9b_TB1626_00 = .60 X_Wal-Mart = 11ea7cce_3d1f_9b54_928c_9f6b9ba849a4_TB1626_00 = .40 Var(R_p)= x₁²^Var(R₁)+ x₂²^Var(R₂)+ 2X₁X₂Cov(R₁,R₂) = (.60)²(0.0568)+ (.40)²(0.1413)+ 2(.6)(.4)(0.0037)= 0.0449

Use the Table for the Question(s)below