Answered: I am confused about step 3, especially…

I am confused about step 3, especially how the variance for the joint portfolio was obtained. Why did we multiply (0.5) (0.5) by 2 and the covariance. Thank you.

Glencoe Algebra 1, Student Edition, 9780079039897, 0079039898, 2018

18th Edition

ISBN:9780079039897

Author:Carter

Publisher:Carter

Chapter4: Equations Of Linear Functions

Section4.5: Correlation And Causation

Problem 2AGP

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Good day,

I am confused about step 3, especially how the variance for the joint portfolio was obtained. Why did we multiply (0.5) (0.5) by 2 and the covariance.

Thank you.

Definition Definition Measure of how two random variables change together. Covariance indicates the joint variability or the directional relationship between two variables. When two variables change in the same direction (i.e., if they either increase or decrease together), they have a positive covariance. When the change is in opposite directions (i.e., if one increases and the other decreases), the two variables have a a negative covariance.

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