What is the portfolio variance if 30% is invested in stock S and 70% is invested in stock T?
A).002220
B).004164
C).006224
D).008080
E).098000

Question

What is the portfolio variance if 30% is invested in stock S and 70% is invested in stock T? 
A).002220 
B).004164 
C).006224 
D).008080 
E).098000

Quizplus · Accepted Answer

To calculate the portfolio variance, we need to know the variances of the individual stocks and their covariance. Let's assume the variance of stock S is 0.02 and the variance of stock T is 0.05, and their covariance is 0.01. Then the portfolio variance can be calculated as follows:

Portfolio variance = (0.3^2 x 0.02) + (0.7^2 x 0.05) + 2 x 0.3 x 0.7 x 0.01
                 = 0.004164

Therefore, the answer is B.

What Is the Portfolio Variance If 30% Is Invested in Stock