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You are attempting to build a portfolio using the index model method, and are currently trying to find the firm-specific variance of your actively managed
You are attempting to build a portfolio using the index model method, and are currently trying to find the firm-specific variance of your actively managed portfolio, which will be 37% Asset 1 and the rest in Asset 2. Asset 1 has an idiosyncratic variance of 0.18, and Asset 2 has an idiosyncratic variance of 0.58. What is the idiosyncratic variance of your actively managed portfolio?
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