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93. Calculate the variance of an investment with five year returns of 10%, 6%, 4%, 2%...

93. Calculate the variance of an investment with five year returns of 10%, 6%, 4%, 2% and (10%).

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Answer #1

where N = no. of returns

Mean of Returns = ( 10 + 6 + 4 + 2 - 10 ) / 5 = 2.4 %

Return Mean Return-Mean (Return-Mean)2
10 2.4 7.6 57.76
6 2.4 3.6 12.96
4 2.4 1.6 2.56
2 2.4 -0.4 0.16
-10 2.4 -12.4 153.76

Sum of All ( Return - Mean) 2 = 57.76 + 12.96 + 2.56 + 0.16 + 153.76 = 227.2

Sum of All ( Return - Mean) 2 / N = 227.2 / 5 = 45.44

Square Root of [ Sum of All ( Return - Mean) 2 / N ] = ( 45.44 ) 1/2 = 6.74 %

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