What is the variance of a portfolio consisting of $3,500 in stock G and $6,500 in stock H?
$\begin{array}{llcc}
\text { State of } & \text { Probability of } & \underline{\text { Returns if State Occurs }} \
\underline{ \text { Economy }} & \underline{\text { State of Economy }} & \underline{\text {Stock G\quad Stock H}} \
\text {Boom } & 15\% &15\% \quad \quad 9\%\
\text { Normal} & 85\%&8\%\quad \quad6\%\

\end{array}$
A).000209
B).000247
C).002098
D).037026
E).073600

Question

What is the variance of a portfolio consisting of $3,500 in stock G and $6,500 in stock H? 
$\begin{array}{llcc}
  \text { State of } & \text { Probability of } & \underline{\text { Returns if State Occurs }}  \
\underline{ \text { Economy }} & \underline{\text { State of Economy }} & \underline{\text {Stock G\quad  Stock H}} \
 \text {Boom  } & 15\%  &15\% \quad \quad 9\%\
 \text {  Normal} & 85\%&8\%\quad \quad6\%\

\end{array}$
A).000209
B).000247
C).002098
D).037026
E).073600

Quizplus · Accepted Answer

The variance of the portfolio is calculated using the weighted average of the variances and covariances of the individual stocks, considering their weights in the portfolio and the probabilities of different economic states.

What Is the Variance of a Portfolio Consisting of $3,500