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Question
What is the variance of the returns on a portfolio that is invested 40 percent in Stock S and 60 percent in Stock T?
| State of Economy | Probability of State of Economy | Rate of Return if State Occurs | |||||||
| Stock S | Stock T | ||||||||
| Boom | .06 | .22 | .18 | ||||||
| Normal | .92 | .15 | .14 | ||||||
| Bust | .02 | − | .26 | − | .09 | ||||
A) .00107
B) .00091
C) .00118
D) .00136
E) .00083
Answer
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