Question

What is the variance of returns of a portfolio that produced returns of 20%, 25%, and 30%, respectively

Answer 1

16.7

Step-by-step explanation:

Calculation for What is the variance of returns of the portfolio

First step is to calculate the mean

Mean = (20% + 25% + 30%) / 3

Mean =75% / 3

Mean = 25%

Now let calculate the variance of returns of the portfolio

Portfolio variance of returns = {(20 − 25)^2 + (25 − 25)^2 + (30 − 25)^2} / 3

Portfolio variance of returns=25+0+25/3

Portfolio variance of returns=50/3

Portfolio variance of returns= 16.7

Therefore the variance of returns of the portfolio will be 16.7