A) The rate of return on the common stock of F&F company is expected to be 14% in a boom period, 8% in a normal economy, and only 2% in a recession economy. The probabilities of these economic states are 20% for a boom, 70% for a normal economy, and 10% for a recession. What is the variance of the returns on the common stock of the company?

B) Find the expected market return given the expected return on asset A is 16% and the risk-free rate is 7%? Asset A has a beta of 1.2.