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Problem:

If the economy booms, RTF, Inc. stock is expected to return 11 percent. If the economy goes into a recessionary period, then RTF is expected to only return 5 percent. The probability of a boom is 75 percent while the probability of a recession is 25 percent. 3

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Question: What is the variance of the returns on RTF, Inc. stock?.

Note: Please explain comprehensively and give step by step solution.

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Category:- Basic Finance
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