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You are expecting either a recession or steady growth next year. Recession has a 43% probability...

You are expecting either a recession or steady growth next year. Recession has a 43% probability of happening. In steady growth, stock ABC returns 9.75% and stock XYZ returns 6.75%. In a recession, stock ABC returns -5.30% and stock XYZ returns -3.10%. You are going to put together a portfolio of these two stocks with positive portfolio weight in each and allocate 37% of the portfolio to ABC with the remainder to XYZ. What is the variance of the portfolio?

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Variance is 0.00340

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