You decide to invest in a portfolio consisting of 26 percent
Stock A, 43 percent Stock B, and the remainder in Stock C. Based on
the following information, what is the variance of your
portfolio?
State of Economy | Probability of State | Return if State Occurs | ||||||||||
of Economy | Stock A | Stock B | Stock C | |||||||||
Recession | .127 | − | 11.40% | − | 4.80% | − | 13.80% | |||||
Normal | .691 | 10.70% | 10.92% | 18.20% | ||||||||
Boom | .182 | 21.81% | 25.63% | 30.33% |
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