COMPUTE THE VARIANCE OF THE PORTFOLIO, INCLUDING SECURITY A, B AND FUND C

Suppose that you purchase $6,000 of security A and$18,000 of security B, and borrow $4,000 of fund C. These transactions constitute your entire portfolio. Assume that borrowing takes place at a risk-free interest rate of 5%. The following additional information is given: A B Var(r) 0.36 0.25 Er 0.20 0.16 together with the correlation coefficient of A and B being 0.80. Compute the variance