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Firm A and Firm B (both are all-equity firms) are planning to merge. What is the standard deviation of returns for the merged firm's assets
Firm A and Firm B (both are all-equity firms) are planning to merge. What is the standard deviation of returns for the merged firm's assets (i.e., Firm AB's assets) using the following information?
Market value of Firm A = $650 million
Market value of Firm B = $350 million
Market value of Firm AB = $1,000 million
Standard deviation of returns for Firm As assets = 0.25 (or 25.0%)
Standard deviation of returns for Firm Bs assets = 0.48 (or 48.0%)
Correlation between the returns of the assets of the two firm = 0.20
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