What is the volatility of a portfolio consists of an equal

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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 50% probability that the firm will have a 12% return and a 50% probability that the firm will have a -11% return.

What is the volatility (standard deviation) of a portfolio that consists of an equal investment in 25 type S firms? What is the volatility (standarddeviation) of a portfolio that consists of an equal investment in 25 type I firms?

Reference no: EM131132528

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