Use the Information for the Question(s)below

question 15

Multiple Choice

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 an individual firm is closest to:

• A)15.0%
• B)10.0%
• C)23.0%
• D)5.25%

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