How the fluctuation in return is eliminated

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Assume that Happy Days, Inc., pays an 8 percent return during expansions and a zero percent return during recessions with certainty. Sad Days, Inc., pays a zero percent return in expansions and an 8 percent return in recessions with certainty.

Show how the fluctuation in return is eliminated if an investor splits his or her surplus funds equally between HappyDays and SadDays.

Reference no: EM131209391

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