The Rate of Return on the Common Stock of Flowers

question 25

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) 0.001044
• B) 0.001280
• C) 0.001863
• D) 0.002001
• E) 0.002471

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