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You are expecting either a recession or steady growth next year. Recession has a 41% probability...

You are expecting either a recession or steady growth next year. Recession has a 41% probability of happening. In steady growth, stock ABC returns 10.00% and stock XYZ returns 7.00%. In a recession, stock ABC returns -5.40% and stock XYZ returns -3.20%. You are going to put together a portfolio of these two stocks with positive portfolio weight in each and allocate 39% of the portfolio to ABC with the remainder to XYZ. What is the variance of the portfolio?

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Variance is 0.00362

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