Calculation:

Given:

• Weight of Asset X (w_x) = 35% = 0.35
• Weight of Asset Z (w_z) = 65% = 0.65
• Variance of Asset X (σ_x²) = 0.1225
• Variance of Asset Z (σ_z²) = 0.3721
• Covariance between X and Z (Cov_xz) = 0.19

Portfolio Variance Formula: σ_p² = w_x² * σ_x² + w_z² * σ_z² + 2 * w_x * w_z * Cov_xz

Step-by-step calculation:

1. w_x² * σ_x² = (0.35)² * 0.1225 = 0.1225 * 0.1225 = 0.01500625
2. w_z² * σ_z² = (0.65)² * 0.3721 = 0.4225 * 0.3721 = 0.15716225
3. 2 * w_x * w_z * Cov_xz = 2 * 0.35 * 0.65 * 0.19 = 2 * 0.2275 * 0.19 = 2 * 0.043225 = 0.08645

Total Portfolio Variance: σ_p² = 0.01500625 + 0.15716225 + 0.08645 = 0.2586185 ≈ 0.2587

Therefore, the portfolio variance is approximately 0.2587, which corresponds to option D.