Question

Over the past five years, a stock returned 8.4 percent, 8.7 percent, 3.2 percent, 1.5 percent, and 11.5 percent, respectively. What is the variance of these returns

Answer 1

Answer: 0.001731

Explanation:

To solve the variance, we have to calculate the mean first. This will be the addition of the sticks given which is then divided by 5. This will be:

= (0.084 + 0.087 + 0.032 + 0.015 + 0.115) / 5

= 0.0666

We then calculate the variance as shown below:

Variance = [(0.084 - 0.0666)² + (0.087 - 0.0666)² + (0.032 - 0.0666)² + (0.015 - 0.0666)² + (0.115 - 0.0666)²] / 5 - 1

= [0.000303 + 0.000416 + 0.001197 + 0.002663 + 0.002343] / 4

Variance = 0.001731