Question

In the next year, you expect ANZ shares have a 20% chance of earning 10 percent return, a 50% chance of earning only 2 percent and a 30% chance of earning -10 percent. Based on this, what is the variance of ANZ's expected return?.

Answer 1

Stock
Scenario	Probability	Return%	=rate of return% * probability	Actual return -expected return(A)%	(A)^2* probability
Scenario 1	0.2	10	2	10	0.002
Scenario 2	0.5	2	1	2	0.0002
Scenario 3	0.3	-10	-3	-10	0.003
	Expected return %=	sum of weighted return =	0	Sum=Variance Stock=	0.0052