Q1:

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 70?% probability that the firm will have a? 20% return and a 30?% probability that the firm will have a ??30% return.

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

Q2:

Q3:

Big Cure and Little Cure are both pharmaceutical companies. Big Cure presently has a potential? "blockbuster" drug before the Food and Drug Administration? (FDA) waiting for approval. If? approved, Big? Cure's blockbuster drug will produce? $1 billion in net income for Big Cure. Little Cure has ten? separate, less important drugs before the FDA waiting for approval. If? approved, each of Little? Cure's drugs would produce $50 million in net income for Little Cure. The probability of the FDA approving a drug is 50?%.

What is the expected payoff for Little? Cure's ten? drugs?

OA. 5.12% O B. 5% OC. 22.91% OD. 11.46%