Author Question: Find the variance for a security that has three one-year returns of -5, 15, and 20. A) 175.00 B) ... (Read 64 times)

wenmo · **on:** Jul 10, 2018

Find the variance for a security that has three one-year returns of -5, 15, and 20.

A) 175.00
B) 75.00
C) 58.33
D) 25.00

Question 2

Find the variance for a security that has three one-year returns of 5, 10, and 15.

A) 10.00
B) 16.67
C) 25.00
D) 30.00

dlook33 · **Reply #1 on:** Jul 10, 2018

Answer to Question 1

Answer: A
Explanation: A) Average return = rt/n = (-5 + 15 + 20)/3 = 10
Variance(r) = (ri - average)2 / (n - 1)
= (-5 - 10)2 + (15 - 10)2 + (20 - 10)2/(3 - 1) = 175.

Answer to Question 2

Answer: C
Explanation: C) Average return = rt/n = (5 + 10 + 15)/3 = 10
Variance(r) = (ri - average)2 / (n - 1)
= (5 - 10)2 + (10 - 10)2 + (15 - 10)2/(3 - 1) = 25