Question: Use the following information to answer the question below. State Probability Return on A Return on B Boom 0.3 12% 6% Normal 0.4 8% 12%

Use the following information to answer the question below.

State Probability Return on A Return on B
Boom 0.3 12% 6%
Normal 0.4 8% 12%
Bust 0.3 -4% -16%

What is the variance of return of a portfolio with weights of 30% in security A and 70% in security B?

a)

0.0070

b)

0.0091

c)

0.0102

d)

0.0157

e)

0.1896

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