What is the variance of the returns on a portfolio that is invested 40 percent in Stock S and 60 percent in Stock T?


State of


Economy


Probability of


State of Economy


Rate of Return


if State Occurs






Stock S


Stock T


Boom

. 06



. 22





. 18




Normal

. 92



. 15





. 14




Bust

. 02


−

. 26




−

. 9