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The distributions of rates of return for Companies AA and BB are given below: ...

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Finance

The distributions of rates of return for Companies AA and BB are given below:

State of the economy Boom Normal Recession

probability of this State Occurring 0.2 0.6 0.2

AA 30% 10% -5%

BB -10% 5% 50%

Lets assume, James Green is considering building an investment portfolio (Portfolio Z) containing these two assets. Will it be beneficial for James Green to invest in the portfolio briefly explain why.

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