Use the information for the question(s)below.
Consider an economy with two types of firms: S and U. The S firms always move together, but U firms move independently of each other. For both types of firms there is a 70% probability that the firm will have a 20% return and a 30% probability that the firm will have a -30% return.
-The standard deviation for the return on a portfolio of 20 type S firms is closest to:
A)5.25%
B)15.0%
C)23.0%
D)5.10%

Question

Quizplus · Accepted Answer

The Answer of Use the information for the question(s)below.
Consider an economy with two types of firms: S and U. The S firms always move together, but U firms move independently of each other. For both types of firms there is a 70% probability that the firm will have a 20% return and a 30% probability that the firm will have a -30% return.
-The standard deviation for the return on a portfolio of 20 type S firms is closest to:
A)5.25%
B)15.0%
C)23.0%
D)5.10%

Use the Information for the Question(s)below