You are expecting either a recession or steady growth next year. Recession has a 25% probability...

You are expecting either a recession or steady growth next year. Recession has a 25% probability of happening. In steady growth, stock ABC returns 12.00% and stock XYZ returns 9.00%. In a recession, stock ABC returns -6.20% and stock XYZ returns -4.00%. You are going to put together a portfolio of these two stocks with positive portfolio weight in each and allocate 55% of the portfolio to ABC with the remainder to XYZ. What is the variance of the portfolio?

Question 1 options:

	0.00448
	0.00460
	0.00472
	0.00483
	0.00495

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Expert Solution

Ans is 0.00472

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jeff jeffy answered 1 year ago

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You are expecting either a recession or steady growth next year. Recession has a 25% probability...

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