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Consider the following information on returns and probabilities: Invest 0 of your money in Asset A...

  1. Consider the following information on returns and probabilities:

Invest 0 of your money in Asset A and 100% in Asset B.

State      Probability           A             B                           

Boom         .25                   12%       4%         

Bust            .75                   6%         18%      

               what is the standard deviation of the return on the portfolio?

a. 1.7  

b. 2.6

c. 3.9   

d. 4.6  

e. 5.6    

f. 6.9    

g. 7.5   

h. 9.0    

i. 8.2

  j. 11         

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