You've owned a share of stock for 6 years. It returned 5% in 3 of those years and -5% in the other 3. What was the variance?
A) 0.15%.
B) 0.16%.
C) 0.25%.
D) 0%.

Question

Quizplus · Accepted Answer

The variance is calculated by finding the average of the squared deviations from the mean. The mean return is 0% (since 3 years of 5% and 3 years of -5% average to 0%). The squared deviations are (5-0)^2 = 25 and (-5-0)^2 = 25. The variance is the average of these squared deviations: (25+25+25+25+25+25)/6 = 25, which is 0.25% when expressed as a percentage.

You've Owned a Share of Stock for 6 Years