A stock's return has a mean of 6% and a coefficient of variation of 2. Its variance equals
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A. B. C. D.A
Coefficient of variation = standard deviation/mean. Therefore, standard deviation = 2*6 = 12. Variance = 12^2 = 144
To calculate the variance of a stock's return, we need to use the coefficient of variation and the mean return. The coefficient of variation is calculated by dividing the standard deviation by the mean return. Since the coefficient of variation is given as 2, we can calculate the standard deviation as follows:
Coefficient of variation = Standard deviation / Mean return
2 = Standard deviation / 6%
Multiplying both sides of the equation by 6%, we get:
Standard deviation = 2 * 6% = 12%
Now, to calculate the variance, we square the standard deviation. In this case, the standard deviation is 12%, so we calculate the variance as follows:
Variance = (Standard deviation)^2 = (12%)^2 = 0.12^2 = 0.0144
The variance of the stock's return is 0.0144 or 1.44%. However, none of the answer choices provided match this result exactly. The closest answer choice is D. 12%, but it is not correct. It seems that there might be an error in the answer choices provided by the exam provider.