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