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The Common Stock of The Aristocrat Hotel should Return 23 percent in a Boom economy, 16 percent in a Normal economy, and lose (have a
The Common Stock of The Aristocrat Hotel should Return 23 percent in a Boom economy, 16 percent in a Normal economy, and lose (have a negative return) of 32 percent in a Recession. The Probabilities of a Boom economy, a Normal economy, and a Recession are: 5 percent, 90 percent, and 5 percent, respectively. What is the Variance of the Returns on this Stock? Hint: First, find the Expected Return, E ( R ) of the Aristocrat Hotel (then Use the Variance Formula).
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