A financial analyst believes that over the next year there are three possible outcomes (states of the world) about the economy: recession, normal and boom. The three states of the world will occur with the following probabilities: 20% for a recession, 50% for a normal economy, and 30% for a boom. The analyst forecasts the stock return of Bubble Corporation to be equal to -5% if a recession occurs, +10% if the economy is normal, and +20% if the economy is booming. Which one of the following statements is true about the performance of Bubble over the next year?

Hint: use decimal, not percent returns, in all your calculations) a) The expected stock return of Bubble is equal to 15%. b) The variance of the stock return of Bubble is equal to 0.003. c) The standard deviation of the stock return of Bubble is equal to 8.6%. d) All of the above. e) None of the above.