Consider a Portfolio That Consists of an Equal Investment in 20

question 26

Multiple Choice

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% probability 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%.

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Definitions:

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