Question: Consider the information for assets A, B, and C below: State Probability Return on A Return on B Return on C Boom 0.2 0.3 0.05

Consider the information for assets A, B, and C below: State Probability Return on A Return on B Return on C Boom 0.2 0.3 0.05 0.1 Average 0.4 0.2 0.15 0.25 Bust 0.4 0.1 0.2 0.3

2. Consider Portfolio (Y) comprising 60% Asset A and 40% Asset C. What is the variance of portfolio Y?

All work with methodology and equations used must be shown in detail. The actual equations and careful explanations are required to receive credit for answers, even if correct.

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