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You are expecting either a recession or steady growth next year.Recession has a 39% probability of happening.In steady growth, stock ABC returns 10.25% and stock
You are expecting either a recession or steady growth next year.Recession has a 39% probability of happening.In steady growth, stock ABC returns 10.25% and stock XYZ returns 7.25%.In a recession, stock ABC returns -5.50% and stock XYZ returns -3.30%.You are going to put together a portfolio of these two stocks with positive portfolio weight in each and allocate 41% of the portfolio to ABC with the remainder to XYZ.What is the variance of the portfolio?
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