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The rate of return on the common stock of Lancaster Woolens is expected to be 25 percent in a boom economy, 12 percent in a

The rate of return on the common stock of Lancaster Woolens is expected to be 25 percent in a boom economy, 12 percent in a normal economy, and only 3 percent in a recessionary economy. The probabilities of these economic states are 10 percent for a boom, 70 percent for a normal economy, and 20 percent for a recession. What is the variance of the returns on this common stock?

0.001584

0.002160

0.004860

0.005275

0.003285

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