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Portfolio with three securities: weights 0.5, 0.3, 0.2; σ: 20%, 25%, 30%; pairwise correlation 0.2 between each pair. Portfolio variance is closest to:
A0.0510
B0.0420
C0.0290
D0.0345
Answer & Solution
Correct answer: D. 0.0345
1. Identify what the question asks: this concept maps to multiassetvariance (§4.4.4).
2. Apply the framework or formula relevant to the topic.
3. Eliminate distractors and arrive at the correct option (D).
_Source: ICAI BoS CA Final Paper 2, Ch 6 "Portfolio Management"_
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