Question

You decide to invest in a portfolio consisting of 16 percent Stock A, 51 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		.122		−	10.90%		−	4.30%		−	13.30%
Normal		.681			10.20%			10.82%			17.70%
Boom		.197			21.71%			25.43%			30.13%

Multiple Choice

• .00844

• .00908

• .01026

• .00953

• .01226

Answer 1