Answer (D) is correct . Techspace’s total weighted squared variances can be calculated in two steps. First, the individual variances are computed: Possible Rate of Expected State of the Economy Return Rate Variances Recession (10)% – 8% = (18)% Stable 10% – 8% = 2% ? Expansion 30% – 8% = 22% The total weighted squared variances is arrived at by squaring, weighting, and summing the individual variances: Weighted Variances Squared State of the Economy Variances Squared Probability Variances=0.35*（-0.18）^2+0.4*0.02^2+0.25*0.22^2=0.0236,σ=0.1536.
Answer (A) is incorrect because The standard deviation ( σ) is the square root of this percentage. Answer (B) is incorrect because This percentage results from failing to weight the squared variances. Answer (C) is incorrect because The expected rate of return is 8.0%.
