- CFA Exams
- CFA Exam: Level I 2021
- Study Session 2. Quantitative Methods (1)
- Reading 7. Statistical Concepts and Market Returns
- Subject 6. Measures of Dispersion

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**CFA Practice Question**

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

B. 144%%

C. 3%%

A. 12%%

B. 144%%

C. 3%%

Correct Answer: B

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

^{2}= 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. |