You are expecting either a recession or steady growth next year. Recession has a 29% probability...

You are expecting either a recession or steady growth next year. Recession has a 29% probability of happening. In steady growth, stock ABC returns 11.50% and stock XYZ returns 8.50%. In a recession, stock ABC returns -6.00% and stock XYZ returns -3.80%. You are going to put together a portfolio of these two stocks with positive portfolio weight in each and allocate 51% of the portfolio to ABC with the remainder to XYZ. What is the variance of the portfolio?

	0.00449
	0.00460
	0.00472
	0.00483
	0.00495

Expert Solution

The answer is b)

jeff jeffy answered 2 years ago

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You are expecting either a recession or steady growth next year. Recession has a 29% probability...

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