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4. Consider an economy with two types of firms, S and I. S firms all move together. I firms move indepen- dently. For both types
4. Consider an economy with two types of firms, S and I. S firms all move together. I firms move indepen- dently. For both types of firms, the distributions of return are the same as follows: Probability 10% 20% 30% 40% Return -20% -5% 1% 10% What is the volatility (standard deviation) of a portfolio that consists of an equal investment in 25 S firms? What about an equal investment in 25 I firms? A. S firms: 0.018, I firms: 0.018 B. S firms: 0.092, I firms: 0.092 C. S firms: 0.018, I firms: 0.092 D. S firms: 0.092, I firms: 0.018
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