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Consider an economy with two types of firms, S and I. S firms always move together, but I firms move independently of each other. For
Consider an economy with two types of firms, S and I. S firms always move together, but I firms move independently of each other. For both types of firms, there is a 30% probability that the firm will have a 21% return and a 70% probability that the firm will have a -10% return. What is the volatility (Standard Deviation) of a portfolio that consists of an equal investment in 32 firms of: (a) Type S? (b) Type
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