ABC Investment Corporation Is Considering a Portfolio with 30% Weighting

question 190

Multiple Choice

ABC Investment Corporation is considering a portfolio with 30% weighting in a cyclical stock and 70% weighting in a countercyclical stock. It is expected that there will be three economic states; Good, Average and Bad, each with equal probabilities of occurrence. The cyclical stock is expected to have returns of 12%, 5% and 1% in Good, Average and Bad economies respectively. The countercyclical stock is expected to have returns of -8%, 2% and 14% in Good, Average and Bad economies respectively. Given this information, calculate the portfolio variance.

• A) .0015
• B) .0025
• C) .0035
• D) .0045
• E) .0055

---

Definitions:

Consistency

The quality of always behaving or performing in a similar way, or of always happening in a similar way.

Unstructured

Lacking a defined organization, format, or structure, often leading to unpredictability in processes or outcomes.

Formal

Pertains to actions, processes, or appearances that are done in accordance with established rules, conventions, or etiquette.

Interviewees

are individuals who are being asked questions in an interview setting, typically for the purposes of research, job application, or information gathering.