The Shoe Co. has a beta of.96. The risk-free rate of return is 4.6 percent and the expected return on the market is 13.5 percent. What is the cost of equity? Answer: A portfolio is expected to return 5 percent in a normal economy, lose 10 percent in a booming economy, and return 20 percent in a recessionary economy. The probability of a recession is 30 percent while the probability of a boom is 10 percent. What is the variance of the portfolio? (Hint: do not list variance as a whole percent list as a decimal)