Consider the Following Portfolio of Assets What Is the Variance of the Portfolio (Round to Two

question 27

Multiple Choice

Consider the following portfolio of assets: $$\begin{array} { | c | c | c | c | c | c | } \hline \text { Loan } i & \text { Weight } i & \text { Expected return i } & \sigma i & \sigma i^ { 2 } & \\\hline 1 & 0.45 & 15 \% & 6.05 \% & 36.60 \% & \mathrm { P } _ { 12 } = - 0.2 \\\hline 2 & 0.55 & 13 \% & 8.75 \% & 76.56 \% & \sigma _ { 12 } = - 4.0 \% \\\hline\end{array}$$ What is the variance of the portfolio (round to two decimals) ?

• A)(0.45)²(36.60%) + (0.55)²(76.56%) + (0.45)(0.55)(-0.2) * (6.05%)(8.75%) = 27.95
• B)(0.45)²(36.60%) + (0.55)²(76.56%) + 2(0.45)(0.55)(-0.2) * (6.05%) (8.75%) = 25.33
• C)(0.45)(36.60%) + (0.55)(76.56%) + 2(0.45)²(0.55)2 (-0.2) * (6.05%)(8.75%) = 57.28
• D)(0.45)(36.60%) + (0.55)(76.56%) + 2(0.45)(0.55)(-0.2) * (6.05%)(8.75%) = 53.34

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