A stock had returns of 18.58%, -5.58%, and 20.81% for the past three years. What is...

A stock had returns of 18.58%, -5.58%, and 20.81% for the past three years. What is the variance of returns? Enter as a decimal, rounding to 4th decimal place. (E.g., 0.0357)

Expert Solution

given data : stock returns a=18. 58℅, b=-5.58%, c=20.81%. And number of years n=3. To find : variance of returns. Solution: convert percentage by dividing 100 we get a=0.1858, b=-0.0558, c=0.2081. Next calculate average return by adding number of stock returns and dividing by number of years. So average return=0.185-0.058+0.2081/3=0.1117. Final step is to find variance =[(0.109-0.1117) ^2+(-0.58-0.1117) ^2+(0.208-0.1117) ^2] /3-1= (7.29×10^-6+0.478+9.292×10^-3) /2 =0.2186. So there for the variance of return =0.2186.

Rahul Sunny answered 2 years ago

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