What is the variance of return of a three-stock portfolio (each stock being equally weighted)that produced returns of 20%,25%,and 30%?
A) 16.67
B) 33.33
C) 50.00
D) 100.00

Question

Quizplus · Accepted Answer

The variance of the portfolio return is calculated by finding the average of the squared deviations from the mean return. 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 Return of a Three-Stock Portfolio