Over the past five years, Northern Railway stock had annual returns of 11, 15, -5, 8.5, and 18 percent, respectively. What is the variance of these returns?
A) .00548
B) .00685
C) .00790
D) .01370
E) .02740

Question

Quizplus · Accepted Answer

To calculate the variance, first find the mean of the returns: (11 + 15 - 5 + 8.5 + 18) / 5 = 9.9. Then, calculate each return's deviation from the mean, square it, and find the average of these squared deviations: [(11-9.9)² + (15-9.9)² + (-5-9.9)² + (8.5-9.9)² + (18-9.9)²] / 5 = 0.00790.

Over the Past Five Years, Northern Railway Stock Had Annual