Use the Information for the Question(s)below

question 45

Multiple Choice

Use the information for the question(s) below.
Big Cure and Little Cure are both pharmaceutical companies.Big Cure presently has a potential "blockbuster" drug before the Food and Drug Administration (FDA) waiting for approval.If approved,Big Cure's blockbuster drug will produce $1 billion in net income for Big Cure.Little Cure has 10 separate less important drugs before the FDA waiting for approval.If approved,each of Little Cure's drugs would produce $100 million in net income for Little Cure.The probability of the FDA approving a drug is 50%.
-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%

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