You’ve observed the following returns on Yasmin Corporation’s stock over the past five years: 13 percent, –13 percent, 20 percent, 25 percent, and 10 percent

Finance Nov 27, 2020

You’ve observed the following returns on Yasmin Corporation’s stock over the past five years: 13 percent, –13 percent, 20 percent, 25 percent, and 10 percent. What was the variance of the company's stock returns over this period? Please show me how to arrive to the correct answer.

Expert Solution

Average Return = [0.13 + (-0.13) + 0.20 + 0.25 + 0.10] / 5
Average Return = 0.55 / 5
Average Return = 0.11 or 11.00%

Variance = [(0.13 - 0.11)^2 + (-0.13 - 0.11)^2 + (0.20 - 0.11)^2 + (0.25 - 0.11)^2 + (0.10 - 0.11)^2] / 4
Variance = 0.0858 / 4
Variance = 0.02145

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