Question
Consider an economy with two types of firms, S and I. S firms all move together. I firms move independently. For both types of firms
Consider an economy with two types of firms, S and I. S firms all move together. I firms move independently. For both types of firms there is a 42%probability that the firm will have a 22% return and a 58% probability that the firm will have a 18% return. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in:
a.25 firms of type S?
b.25 firms of type I?
a. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in 25 firms of type S? Standard deviation is ______%.
(Round to two decimal places.)
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