The covariance of returns on stocks X and Y is 0002100 Consi

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.

Solution

variance = 0.10^2*0.004 + 0.9^2*0.007 + 2*0.1*0.9*0.0021

variance of the portfolio = 0.006088