The probability of a boom is 30 percent while the


A portfolio is expected to return 10 percent in a normal economy, lose 8 percent in a boom economy, and return 16 percent in a recessionary economy. The probability of a boom is 30 percent while the probability of a recession is 20 percent. What is the variance of the portfolio?

a. .0010

b. .0087

c. .0312

d. .0931

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