Kathleen has two investment opportunities. She can invest in The Sunglasses Company or the Umbrella Company. She estimates there is a 50% chance it will remain sunny andSunglasses Co. stock will rise 25% and Umbrella Co. stock will stay flat. She also estimates there is a 50% chance it will rain and Sunglasses Co. stock will remain flat and Umbrella Co.stock will rise by 75%. If she diversifies her investment by putting 50% of her money in each company, what is the expected return and standard deviation of her portfolio?The expected return is 28.75% and the standard deviation is 10.87%O The expected return is 25.00% and the standard deviation is 12.50%O The expected return is 25.00% and the standard deviation is 10.87%O The expected return is 28.75% and the standard deviation is 12.50%O The expected return is 21.74% and the standard deviation is 10.87%

Let's approach this step by step:1. First, let's calculate the expected return of the portfolio:o If…

Answered: Kathleen has two investment…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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