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Assume that the risk-free rate is 1%. State of Economy Probability Stock A Stock B Boom .2 .30 .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 .30 .16

Neutral .4 0 .02

Recession .4 -.1 -0.04

What is the variance of a portfolio that is equally invested in Stock A, Stock B, and the risk-free asset? (Round to 6 places after decimal)

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