Math Problem Statement
A stock will have a loss of 11.4 percent in a bad economy, a return of 11.2 percent in a normal economy, and a return of 25.1 percent in a hot economy. There is 30 percent probability of a bad economy, 33 percent probability of a normal economy, and 37 percent probability of a hot economy. What is the variance of the stock's returns?
Multiple Choice
.04441
.14901
.01665
.02220
.03331
Solution
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Math Problem Analysis
Mathematical Concepts
Probability
Expected Value
Variance
Formulas
Expected Return: μ = Σ(Pi × Ri)
Variance: σ² = Σ(Pi × (Ri - μ)²)
Theorems
Law of Total Probability
Suitable Grade Level
Grades 10-12
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