Question

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

Answer 1

83.51

Explanation:

The formula for variance is
`(SUM(x-\mu)^2)/(n)`

This means we subtract the mean of each value and square the result. Then take the SUM of each. Then divide by n, the number of numbers.

Let's find the mean (mu) first. Mean is the sum of all the numbers divided by the number of numbers.

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

Now we find the variance:

Variance =
`((6.2-3.26)^2+(-10.4-3.26)^2+(-2.2-3.26)^2+(16.9-3.26)^2+(5.8-3.26)^2)/(5)\\=83.51`

The variance is 83.51