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 54 % probability that the firm will have a 28 % return and a 46 % probability that the firm will have a negative 9 % return. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in:
a. 22 firms of type S?
b. 22 firms of type I?
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Foundations Of Financial Management
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
11th Canadian Edition
1259024970, 978-1259265921
