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 M alone? Hint Find the standard deviations of asset M and 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 O only, or assets N and O only? Use a 50/50 split between the asset pairs, and find the standard deviation of each asset pair. Data Table (Click on the following icon 2 in order to copy its contents into a spreadsheet.) States Boom Normal Recession Probability 25% 51% 24% Asset M Return 10% 8% 2% Asset N Return 21% 12% 1% Asset O Retum 2% 8% 10% Print Done