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The rate of return on the common stock of a company is expected to be 14.50% in a boom economy, 9.50% in a normal economy,
The rate of return on the common stock of a company is expected to be 14.50% in a boom economy, 9.50% in a normal economy, and only 4.00% in a recessionary economy. The probabilities of these economic states are 34.0% for a boom, 42.0% for a normal economy, and 24.0% for a recession. What is the variance of the returns on the common stock of the company?
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