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Assume that the risk-free rate is 1%. State of Economy Probability Stock A Stock B Boom .2 .3 .16 Neutral .4 0 .02 Recession .4

Assume that the risk-free rate is 1%.

State of Economy Probability Stock A Stock B

Boom .2 .3 .16

Neutral .4 0 .02

Recession .4 -.1 -0.04

What is the variance of a portfolio that has $2000 in Stock A, $3000 in Stock B, and $5000 in the risk-free asset? (Round to 6 places after decimal)

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