The variance of an investment's returns is a measure of the:
A) volatility of the rates of return.
B) probability of a negative return.
C) historic return over long periods.
D) average value of the investment.

Question

Quizplus · Accepted Answer

The variance of an investment's returns is a measure of how much those returns vary or fluctuate over time, which is commonly referred to as volatility. Therefore, option A, which states that it is a measure of the volatility of the rates of return, is the correct answer. Option B is incorrect because variance does not measure the probability of a negative return; it only measures how much the returns vary around the mean return. Option C is also incorrect because variance does not provide information about historic returns over long periods. Option D is incorrect because variance is not a measure of the average value of an investment, but rather a measure of its volatility.

The Variance of an Investment's Returns Is a Measure of The