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

34%

probability that the firms will have a

10 %

return and a

66 %

probability that the firms will have a

negative 1 %

return. Plot the volatility as a function of the number of firms in the two portfolios.

The standard deviation of type S stock is

nothing%.

(Round to two decimal places.)The correct plot of the volatility of type S stock as a function of the number of firms is graph 1 or 2

The standard deviation of type I stock is

nothing%.

(Round to two decimal places.)

The correct plot of the volatility of type I stock as a function of the number of firms I (Select from the drop-down menu.)