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What is the expected return and variance of the returns

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Question 1: Ada Hotel & Resorts' stock is expected to return 8.5 percent if the economy is normal. If the economy falls into a recession, the stock's return is projected at a negative 5.4 percent. If the economy booms, the stock's return is expected to be 12 percent. The probability of a normal economy is 60 percent while the probability of a recession and boom is 20 percent each. Given this information, what is the expected return and variance of the returns on this stock?

Reference no: EM132582097

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