You decide to invest in a portfolio consisting of 26 percent Stock A, 49 percent Stock B, and the remainder in Stock C. Based on the followinginformation, what is the variance of your portfolio?State ofEconomyRecessionNormalBoomProbabilityof StateEconomy.116.669.215Multiple ChoiceReturn if State OccursStock B-3.70%Stock A-10.30%9.60%21.59%10.70%25.19%Stock C-12.70%17.10%29.89%

First, we need to determine the return of the portfolio using the formula below for each state of…

Answered: You decide to invest in a portfolio…

You decide to invest in a portfolio consisting of 26 percent Stock A, 49 percent Stock B, and the remainder in Stock C. Based on the following information, what is the variance of your portfolio?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

You decide to invest in a portfolio consisting of 26 percent Stock A, 49 percent Stock B, and the remainder in Stock C. Based on the following
information, what is the variance of your portfolio?
State of
Economy
Recession
Normal
Boom
Probability
of State
Economy
.116
.669
.215
Multiple Choice
Return if State Occurs
Stock B
-3.70%
Stock A
-10.30%
9.60%
21.59%
10.70%
25.19%
Stock C
-12.70%
17.10%
29.89%

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