What Is the Portfolio Variance If 30% Is Invested in Share

question 110

Multiple Choice

What is the portfolio variance if 30% is invested in share S and 70% is invested in share T?
$\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad$ Returns if
$\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad$ State Occurs
$\begin{array}{|l|l|l|l|}\hline \text { State of Economy } & \text { Probability of State of Economy } & \text { ShareS } & \text { Share T } \\\hline \text { Boom } & 40 \% & 12 \% & 20 \% \\\hline \text { Normal } & 60 \% & 6 \% & 4 \% \\\hline\end{array}$

• A).002220
• B).004056
• C).006224
• D).008080
• E).098000

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Definitions:

Random Fluctuations

The unpredictable changes in variables or systems over time, which can be due to a variety of uncontrolled or random factors.

Seasonal Fluctuations

Variations in demand, supply, or other economic factors that regularly occur at specific times of the year due to changes in season.

Demand Increases

A rise in the quantity of a product or service that consumers are willing and able to purchase at various prices, often leading to adjustments in production or pricing strategies.

Smoothing Constants

Parameters used in exponential smoothing methods for forecasting that determine the weight of historical data in making predictions.