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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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Thanks again for your wonderful site ... it definitely made the difference.
Craig Baugh

Craig Baugh

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® 2024 Level I Curriculum, Volume 2, Module 1.