Florida Company (FC)and Minnesota Company (MC)are both service companies.Their stock returns for the past three years were: FC: -5%,15%,20%; MC: 8%,8%,20%.
Calculate the variances of returns for FC and MC.

Question

Quizplus · Accepted Answer

To calculate the variance, we need to first find the mean return for each company:

FC mean return = (-5% + 15% + 20%) / 3 = 10%
MC mean return = (8% + 8% + 20%) / 3 = 12%

Then, we can calculate the variance using each company's individual returns:

FC variance = [( -5% - 10%)² + (15% - 10%)² + (20% - 10%)²] / 3 = 175
MC variance = [(8% - 12%)² + (8% - 12%)² + (20% - 12%)²] / 3 = 48

Therefore, the correct choice is C.

Florida Company (FC)and Minnesota Company (MC)are Both Service Companies