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The rates of return for a stock are as follows: 2% if the state of the economy is recession, 8% if the state of the
The rates of return for a stock are as follows: 2% if the state of the economy is recession, 8% if the state of the economy is normal, and 11% if the state of the economy is expansion. The probability for each state of the economy is 25%, 45%, and 30%, respectively. Assume the stock has an expected rate of return of 7.4%. What is the variance for this stock?
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