The Rate of Return on the Common Stock of Flowers

question 292

Multiple Choice

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

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Definitions:

High Explosives

Substances that detonate, producing an explosion characterized by extremely rapid release of gas and heat, used in military and industrial applications.

Detonate

To explode or cause to explode with sudden intensity, often used in the context of explosives or chemical reactions.

Pressure

The force applied perpendicular to the surface of an object per unit area over which that force is distributed.

Detonator

A device or a small amount of explosive used to trigger an explosive charge or set off another explosive device.