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Basic Question 9 of 23

The variance of a three-stock portfolio contains ______ individual variance terms and ______ unique covariance terms.

A. 3; 3
B. 3; 6
C. 6; 6
D. 3; 9
E. 6; 9
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User Contributed Comments 4

User Comment
myanmar 3 companies A,B,C
three possible covariance outcomes:
AB
AC
BC
surob the formula to compute covariance count - n(n-1)/2
ljamieson nC2 = n(n-1)/2
Phlipsen thanks ljamieson
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I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!
Barnes

Barnes

Learning Outcome Statements

calculate and interpret the mean, variance, and covariance (or correlation) of asset returns based on historical data

calculate and interpret portfolio standard deviation

describe the effect on a portfolio's risk of investing in assets that are less than perfectly correlated

CFA® 2025 Level I Curriculum, Volume 2, Module 1.