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Title: Consider a portfolio that consists of an equal investment in 20 firms. For each of these firms, ... Post by: Memphic on Nov 19, 2017 Consider a portfolio that consists of an equal investment in 20 firms. For each of these firms, there is a 70% probability that the firms will have a 16% return and a 30% that they will have a -8% return. Each of these firms' returns is independent of all others. The standard deviation of this portfolio is closest to:
A) 2.5% B) 4.2% C) 8.8% D) 11.0% Title: Re: Consider a portfolio that consists of an equal investment in 20 firms. For each of these firms, ... Post by: deusmaroto on Nov 19, 2017 A
Explanation: A) E[return] = (.70)(16%) + (.30)(-8%) = 8.8% SD(Rt) = = 10.9982% SD(Rportfolio) = = 2.459268% |