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You have been given the following forecasts for the economy and Stock A: (1) the probability of ...

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You have been given the following forecasts for the economy and Stock A: (1) the probability of ...

You have been given the following forecasts for the economy and Stock A: (1) the probability of having a recession next year is 30.0%, a normal economy is 55.0%, and an expansion is 15.0%, and (2) the price of Stock A will be $9 if the economy is in recession, $15 if the economy is normal, and $18 if the economy is in expansion. What is the ex ante variance of Stock A's returns if it is currently selling for $12?

▸ 29.4219%2

▸ 54.2419%2

▸ 7.1719%2

▸ 26.7804%2

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Corporate Finance

Edition: 5^th

Author: Booth

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