CFA Practice Question

There are 410 practice questions for this study session.

CFA Practice Question

A stock's return has a mean of 6% and a coefficient of a variation of 2. Its variance equals ______.

A. 12%%
B. 144%%
C. 3%%
Correct Answer: B

Coefficient of variation = standard deviation/mean. Therefore, standard deviation = 2*6 = 12. Variance = 122 = 144

User Contributed Comments 14

User Comment
eaglei Gotta read that question!
nufan wtf!... 144%%
mtcfa So I think they mean 1.44%.
stevelaz B is correct as the SD = 12. so the variance is 12^2 = 144

bdaguy Take each % sign to mean division by 100 ==> 144%% = 1.44% = 0.0144

Standard Deviation = 2 x 6% = 12% = 12/100. Variance = (12/100)^2 = (144/10000) = 0.0144
MattyBo How I got to the answer:
Formula: CV = s/Xbar
2 = s/6%
s = 2*6%
s = 12%
variance = s^2
12%^2 = 144%
Sabs It has to be 144%% or 144%squared. Just in case in exam they have a trick question, one answer with % and one with %%
JKiro thanks bdaguy!
DonAnd bdaguy is absolutely correct!
rsanfo If you square the number, you must square the unit of measurement. For example, rate of acceleration is 32 feet per second per second, so for this question, they would show it as 32 feet second second. This explains the two % signs.
Creep The answer is correct.
assiduous Good concept....badly written question.
Huricane74 Can someone explain if the following logic is incorrect:
12% = .12
.12^2 = 0.0144 or 1.44%
mcbreatz I was thinking the same thing but it looks like it was explained above by bdaguy but each % sign is divide by 100. So 144%% is 1.44% which is .0144.
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