An investment earned the following returns for the years 2003 through 2006:-20%, 50%, 30%, and 10%. What is the variance of returns for this investment?

Question

Quizplus · Accepted Answer

The variance of returns is calculated as the average of the squared differences between each return and the mean return. The mean return is ( -20 + 50 + 30 + 10 ) / 4 = 20%. The squared differences are ( -40)^2, 30^2, 10^2, and -10^2. The average of these squared differences is ( 1600 + 900 + 100 + 100 ) / 4 = 650. The variance is therefore 650 / 4 = 162.5.

An Investment Earned the Following Returns for the Years 2003