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The rate of return on the common stock of Lancaster Woolens is expected to be 18 percent in a boom economy, 8 percent in a
The rate of return on the common stock of Lancaster Woolens is expected to be 18 percent in a boom economy, 8 percent in a normal economy, and only 2 percent in a recessionary economy. The probabilities of these economic states are 12 percent for a boom and 10 percent for a recession. What is the variance of the returns on this common stock?
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