A mutual fund has five equally likely outcomes: 15%, -7%, 5%, 2%, and -1%. Calculate the...

A mutual fund has five equally likely outcomes: 15%, -7%, 5%, 2%, and -1%. Calculate the variance of the rate of return.

0.53%

0.26%

0.10%

0.14%

Solutions

Expert Solution

Variance =ΣP(X-X̅)^2

Where,

X= Return
X̅= Expected Return

P = Probability
	P	X	X̅=P*X	(X - X̅)^2 i.e.(X-2.8)^2	ΣP(X-X̅)^2
1	0.2	15.00	3.00	148.84	29.77
2	0.2	-7.00	-1.40	96.04	19.21
3	0.2	5.00	1.00	4.84	0.97
4	0.2	2.00	0.40	0.64	0.13
5	0.2	-1.00	-0.20	14.44	2.89
Total	1		2.800		53.0


Correct Option : 0.53%

jeff jeffy answered 1 year ago

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