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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 a 15% return and a 40% probability that the firms will have a - 10% return. Plot the volatility as a function of the number of firms in the two portfolios. The standard deviation of type S stock is %. (Round to two decimal places.) The correct plot of the volatility of type S stock as a function of the number of firms is (Select from the drop-down menu.) Graph 1 Graph 2 18.0 18.0- 16.0- Q 16.0- 14.0- 14.0- 3 12.0- 12.0- 10.0- 10.0 Volatility (%) Volatility (%) 8.0- 8.0- 6.0- 6.0- 4.0- 4.0- 2.0- 2.0- 0.0 01 09 0.0- 01 45 50 09 45 50 10 15 20 25 30 35 40 Number of firms in portfolio 10 15 20 25 30 35 40 Number of firms in the portfolio 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 a 15% return and a 40% probability that the firms will have a - 10% return. Plot the volatility as a function of the number of firms in the two portfolios. The standard deviation of type S stock is %. (Round to two decimal places.) The correct plot of the volatility of type S stock as a function of the number of firms is (Select from the drop-down menu.) Graph 1 Graph 2 18.0 18.0- 16.0- Q 16.0- 14.0- 14.0- 3 12.0- 12.0- 10.0- 10.0 Volatility (%) Volatility (%) 8.0- 8.0- 6.0- 6.0- 4.0- 4.0- 2.0- 2.0- 0.0 01 09 0.0- 01 45 50 09 45 50 10 15 20 25 30 35 40 Number of firms in portfolio 10 15 20 25 30 35 40 Number of firms in the portfolio

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