If the economy is normal, Charleston Freight stock is expected to return 16.5 percent. If the economy falls into a recession, the stock's return is projected at a negative 11.6 percent. The probability of a normal economy is 80 percent while the probability of a recession is 20 percent. What is the variance of the returns on this stock? O a. 0.010346 O b. 0.013420 OC. 0.013927 O d. 0.012634 .

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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If the economy is normal, Charleston Freight stock is expected to return 16.5 percent. If the
economy falls into a recession, the stock's return is projected at a negative 11.6 percent. The
probability of a normal economy is 80 percent while the probability of a recession is 20
percent. What is the variance of the returns on this stock?
O a. 0.010346
O b. 0.013420
Oc. 0.013927
O d. 0.012634
Transcribed Image Text:on If the economy is normal, Charleston Freight stock is expected to return 16.5 percent. If the economy falls into a recession, the stock's return is projected at a negative 11.6 percent. The probability of a normal economy is 80 percent while the probability of a recession is 20 percent. What is the variance of the returns on this stock? O a. 0.010346 O b. 0.013420 Oc. 0.013927 O d. 0.012634
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