Suppose that you hold six stocks. The returns on these stocks have

standard

deviations of 30 percent a year and the correlation between each pair is 0.2. Of your

fund, 20 percent is invested in one stock, 20 percent is invested in the second stock,

and the remaining 60 percent is spread evenly over a further four stocks.

i. How many variances and covariances do you need to calculate?

ii. Calculate the variance of returns of your portfolio.