You own a stock that is expected to return 25.0 percent in a booming economy and generate a 3.0 percent return in a recession. The probability of an economic boom is 65 percent while there is a 35 percent probability of a recession. What is the variance of returns of this stock?

a. 0.01111

b. 0.02045

c. 0.02363

d. 0.01784 (correct answer)

D is the right answer please show the procedure.