Use the Information for the Question(s)below

question 65

Multiple Choice

Use the information for the question(s) below.
Consider an economy with two types of firms,S and I.S firms always move together,but I firms move independently of each other.For both types of firm 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 I firms is closest to:

• A)5.25%.
• B)5.10%.
• C)15.0%.
• D)23.0%.

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