You have a sample of returns observations for the Malta Stock Fund.The 4 returns are 7.25%, 5.6%, 12.5%, 1.0%.What is the average return and variance of these returns?
A)6.50%; 16.9
B)6.60%; 22.5
C)6.60%; 4.75
D)26.35%; 67.6
E)None of the above.

Question

Quizplus · Accepted Answer

To find the average return, we add up the returns and divide by the number of observations:
(7.25% + 5.6% + 12.5% + 1.0%) / 4 = 6.6%
So the average return is 6.6%.

To find the variance, we first need to find the deviation from the mean for each observation:
7.25% - 6.6% = 0.65%
5.6% - 6.6% = -1.0%
12.5% - 6.6% = 5.9%
1.0% - 6.6% = -5.6%
Then we square each deviation and add them up:
(0.0065)^2 + (-0.010)^2 + (0.059)^2 + (-0.056)^2 = 0.2253%
Finally, divide the sum by the number of observations minus 1:
0.2253% / (4-1) = 0.0751%
So the variance is 0.0751%, or 0.000751 in decimal form. Converted to a percentage, the variance is 7.51%. Therefore, the correct choice is B.

You Have a Sample of Returns Observations for the Malta