Compute variance of the returns on common stock

Reference no: EM1356639

The rate of return on the common stock of Flowers by Flo is expected to be 14% in a boom economy, 8% in a normal economy, and only 2% in a recessionary economy. The probabilities of these economic states are 20% for a boom, 70% for a normal economy, and 10% for a recession. What is the variance of the returns on the common stock of Flowers by Flo?

A. .001044
B. .001280
C. .001863
D. .002001
E. .002471

Reference no: EM1356639

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