Summary statistics for returns on two stocks X and Y are listed below. Mean Variance Stock...

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Summary statistics for returns on two stocks X and Y are listed below. Mean Variance Stock...

Summary statistics for returns on two stocks X and Y are listed below.

	Mean	Variance
Stock X	5.81%	0.004000
Stock Y	3.11%	0.007000

The covariance of returns on stocks X and Y is 0.002100. Consider a portfolio of 10% stock X and 90% stock Y.

What is the variance of portfolio returns?

Please round your answer to six decimal places.

Note that the correct answer will be evaluated based on the full-precision result you would obtain using Excel.

math Statistics-And-Probability

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Answer 1

Answer #1

Variance = (wxơx)2 + (wyơy)2 + 2*Cov(x,y)wxwy =0.1^2*0.004+0.9^2*0.007+2*0.1*0.9*0.0021=

0.006088

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Answer 2

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