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Consider an economy with two types of firms, S and I. S firms always move...

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Question

Accounting

Consider an economy with two types of firms, S and I. S firms always move together, but I firms move independently of each other. For both types of firms there is a

30%

probability that the firm will have a 20% return and a

70%

probability that the firm will have a

30%

return.

The standard deviation for the return on an individual firm is closest to:

A.

11.46%

B.

15%

C.

9.17%

D.

22.91%

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