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
Required:
Question: What is the variance of the returns on RTF, Inc. stock?.
Note: Please explain comprehensively and give step by step solution.