What are her expected returns and the risk from her investment in the three assets? How do they compare with investing in asset M alone?

Hint:

Find the standard deviations of asset M and of the portfolio equally invested in assets M, N, and O.

b.Could Sally reduce her total risk even more by using assets M and N only, assets M and O only, or assets N and O only? Use a 50/50 split between the asset pairs, and find the standard deviation of each asset pair.

States		Probability		Asset M Return		Asset N Return		Asset O Return
Boom		26%		11%		20%		3%
Normal		47%		9%		13%		9%
Recession		27%		3%		0%		11%