2 formulas for variance / covariance of market

[foshizzle]

Var(M) = Var(F₁) * (b₁)² + Var(F₂) * (b₂)² + [2 * b₁ * b₂ * Cov(F₁,F₂)] + Var(ε)

This formula was from CFAI online question bank. I’ve seen this same formula without the Var(ε)

Is there a way to know when this formula should include that last term or not?

[Torsten55]

If you are given Var(ε), you need to use it as market risk would have been underestimated.