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

50

%

probability that the firm will have a 20% return and a

50

%

probability that the firm will have a

minus

30%

return.

The standard deviation for the return on a portfolio of 20 type I firms is closest to:

A.

12.5

%

B.

5.59

%

C.

negative 5

%

D.

25

%