There are two risky assets, asset

d

and asset e. Their returns are

R_(d)

and

R_(e)

and their variances are

\\\\sigma _(d)^(2)

and

\\\\sigma _(e)^(2)

. In a portfolio of these two assets with weights

W_(d)

and

W_(e)

, what is the portfolio variance

\\\\sigma _(p)^(2)

?\

\\\\sigma _(p)^(2)=W_(d)^(2)\ \\\\sigma _(d)^(2)+W_(e)^(2)\ \\\\sigma _(e)^(2)

\

\\\\sigma _(p)^(2)\ =W_(d)^(2)\\\\sigma _(d)^(2)+W_(e)^(2)\\\\sigma _(e)^(2)\ +2W_(d)W_(e)COV(R_(d),R_(e))

\

\\\\sigma _(p)^(2)\ =W_(d)^(2)\\\\sigma _(e)^(2)+W_(e)^(2)\\\\sigma _(d)^(2)\ +2W_(d)W_(e)COV(R_(d),R_(e))

There are two risky assets, asset d and asset e. Their returns are Rd and Re and their variances are d2 and e2. In a portfolio of these two assets with weights Wd and We, what is the portfolio variance p2 ? p2=Wd2d2+We2e2 p2 =Wd2d2+We2e2+2WdWecoV(Rd,Re) p2=Wd2e2+We2d2+2WdWeCOV(Rd,Re)