Benefits of diversification Sally Rogers has decided to invest her wealth equally across the following three assets a. What are her expected returns and the risk from her investment in the three assets? How do they compare with investing in asset Malone? Hint Find the standard deviations of asset Mand of the portfolio equally invested in assets M, N and O b. Could Sally reduce her total risk even more by using assets M and N only, assets M and only, or assets N and only? Use a 50/50 split between the asset paws, and find the standard deviation of each asset pait States Boom Normal Recession Probability 27% 54% 19% Asset M Return 10% 89 2% Asset N Retum 19% 12% - 1% Asset O Return 2% 8% 10%