Consider an economy with two types of firms

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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 37% probability that the firm will have a 10% return and a 63% probability that the firm will have a −2% return. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in:

a. 24 firms of type? S?

b. 24 firms of type? I?

Reference no: EM131860779

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