Consider an economy with two types of firms

Reference no: EM131111031

Consider an economy with two types of firms, S and I. S firms all move together. I firms move independently. For both types of firms, there is a 60% probability that the firms will have a 15% return and a 40% probability that the firms will have a - 10% return. What is the volatilaity (standard deviation) of a portfolio that consists of an equal investment in 20 firms of (a) type S, and (b) type I?

Reference no: EM131111031

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