The standard deviations of returns on stock A and B are 0.25 and 0.40 respectively. The correlation coefficient between the returns on A and B is -0.75. Portfolio P consists of 30% of A and 70% of B. The variance of the return on P is closest to: (a) 0.0115 (b) 0.0525 © 0.4812 (d) 0.6250 (e) I choose not to answer. I get 0,2887792 … I am doing a small mistake i dont know where !! i get Covariance = Corr.StdA.StdB = 0.48751 Thankyou

its not asking for covariance…its asking for the variance of the portfolio which equals wa^2*varA + wb^2*varB + 2*wa*wb*COVAB where wa and wb are the weights of A and B respectively.

the same way i did … calculated the variance to the portfolio but its not right can u please pls check this , what answer you get ?

B wa^2*varA + wb^2*varB + 2*wa*wb*Corr*StdA*StdB

Formula to calculate portfolio variance is var§=sd(a)^2*wa^2+sd(b)^2*wb^2+2*sd(a)*sd(b)*wa*wb*corr(ab), so the answer is b

(.3*.25)^2 + (.7*.4)^2 + 2 * .3 * .7 * -.75 * .25 * .4 = .052525 Choice B

SQUARE(0.30)*SQUARE(0.25) + SQUARE(0.70)*SQUARE(0.45) + 2*(0.30)(0.70)(-0.75)(0.25)(0.40) Whatever that is, is the answer… - Dinesh S

supersunny138, it would help if you put your calculations here if you still need help with figuring out where you were wrong.

good god !! i hate this calculator i was doing all the same calculations even went to school but when my teacher did it was same … uff thanks so much guys for help :)) *huggles*