Benefits of diversification. Sally Rogers has decided to invest her wealth equally across the following three...

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Benefits of diversification. Sally Rogers has decided to invest her wealth equally across the following three assets: a. What are her expected retums and the risk from her investment in the three assets? How do they compare with investing in asset M alone? Hint Find the standard deviations of asset M and of the portfolio equally invested in assets M, N, and O. b. Could Sally reduce her total risk even more by using assets M and N only, assets M and O only, or assets N and O only? Use a 50/50 split between the asset pairs, and find the standard deviation of each asset pair. Data table (Click on the following icon in order to copy its contents into a spreadaheet) Stutes Probebility Asset M Rotum Asset N Retum Asset O Rotum Boom 26% 14% 25% 6% Normal 46% 12% 16% 12% Recession 28% 6% 5% 14% Benefits of diversification. Sally Rogers has decided to invest her wealth equally across the following three assets: a. What are her expected retums and the risk from her investment in the three assets? How do they compare with investing in asset M alone? Hint Find the standard deviations of asset M and of the portfolio equally invested in assets M, N, and O. b. Could Sally reduce her total risk even more by using assets M and N only, assets M and O only, or assets N and O only? Use a 50/50 split between the asset pairs, and find the standard deviation of each asset pair. Data table (Click on the following icon in order to copy its contents into a spreadaheet) Stutes Probebility Asset M Rotum Asset N Retum Asset O Rotum Boom 26% 14% 25% 6% Normal 46% 12% 16% 12% Recession 28% 6% 5% 14%

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