What is the variance of the returns on a portfolio that is invested 40 percent in Stock S and 60 percent in Stock T?
State of
Economy Probability of
State of Economy Rate of Return
if State Occurs
Stock S Stock T
Boom .06 .22 .18 Normal .92 .15 .14 Bust .02 − .26 − .09
a) .00107
b) .00091
c) .00136
d) .00118
e) .00083
