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Kathleen has two investment opportunities. She can invest in The Sunglasses Company or the Umbrella Company. She estimates there is a 50% chance it will
Kathleen has two investment opportunities. She can invest in The Sunglasses Company or the Umbrella Company. She estimates there is a 50% chance it will remain sunny and Sunglasses Co. stock will rise 75% and Umbrella Co. stock will stay flat. She also estimates there is a 50% chance it will rain and Sunglasses Co. stock will remain flat and Umbrella Co. stock will rise by 25% . If she diversifies her investment by putting 50 % of her money in each company , what is the expected return and standard deviation of her portfolio ?
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