Consider an economy with two types of firms, S and I. S firms all move together. I firms move independently. For both ypes of firms, there is a 49% probability that the firm will have a 30% return and a 51% probability that the firm will have a -7% return. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in: a. 31 firms of type S? . 31 firms of type I?

Consider an economy with two types of firms, S and I. S firms all move together. I firms move independently. For both ypes of firms, there is a 49% probability that the firm will have a 30% return and a 51% probability that the firm will have a -7% return. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in: a. 31 firms of type S? . 31 firms of type I?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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