What is the variance of a three-stock portfolio that produced returns of 20 percent, 25 percent and 30 percent?
A)16.67
B)33.33
C)50.00
D)100.00

Question

Quizplus · Accepted Answer

The variance of the portfolio is calculated as the average of the squared deviations from the mean. The mean return is (20% + 25% + 30%) / 3 = 25%. The squared deviations are (20% - 25%)^2, (25% - 25%)^2, and (30% - 25%)^2, which are 25, 0, and 25, respectively. The average of these squared deviations is (25 + 0 + 25) / 3 = 16.67.

What Is the Variance of a Three-Stock Portfolio That Produced