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
−
. 9
