Question:Consider an economy with two types of firms, S and I. S firms all move together. I firms move independently. For both types of firms, there is a 60% probability that the firms will have 15% return and a 40% probability that the firms will have a -10% return. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in 20
a. Type S firms?
b. Type I firms?