Over the past five years,a stock returned 6.2 percent,-10.4 percent,-2.2 percent,16.9 percent,and 5.8 percent,respectively.What is the variance of these returns?

Question

Quizplus · Accepted Answer

1. Calculate the average return over the five years:

(6.2 - 10.4 - 2.2 + 16.9 + 5.8) / 5 = 3.26

2. Calculate the deviation of each year's return from the average:

6.2 - 3.26 = 2.94

-10.4 - 3.26 = -13.66

-2.2 - 3.26 = -5.46

16.9 - 3.26 = 13.64

5.8 - 3.26 = 2.54

3. Square each deviation:

2.94^2 = 8.6436

(-13.66)^2 = 186.1156

(-5.46)^2 = 29.8516

13.64^2 = 186.2896

2.54^2 = 6.4516

4. Calculate the average of the squared deviations:

(8.6436 + 186.1156 + 29.8516 + 186.2896 + 6.4516) / 5 = 08351

Therefore, the variance of these returns is 10439.

Over the Past Five Years,a Stock Returned 6