You Have a Portfolio That Is Comprised of 40% of Stock

question 5

Multiple Choice

You have a portfolio that is comprised of 40% of Stock A and 60% of Stock B. What is the variance of the portfolio?
$\begin{array}{lllr}\text { State of the Economy } & \text { Probability } &\text {E(R) }_{A}&\text { E(R) }_{B}\\&&40\%&60\%\\\\\text { Normal } & .7 & 12\% & 14 \% \\\text { Recegsion } & .3 & -7 \% & -10 \%\end{array}$

• A)101.64%
• B)102.13%
• C)106.84%
• D)107.15%
• E)108.93%

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Definitions:

Capital

Capital refers to the financial resources that businesses use to fund their operations and grow, including equity, debt, and retained earnings.

Assets

Resources owned by a company that have economic value and are expected to provide future benefits.

Rent Expense

The cost incurred by a business for leasing a property or equipment for operational purposes.

Income Summary

An account used in the closing process that summarizes the results of all revenue and expense accounts.