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%; 0.23%
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 simply add up the returns and divide by the number of observations:
(7.25% + 5.6% + 12.5% + 1.0%)/4 = 6.60%
To find the variance, we need to first find the deviation of each return from the average return:
(7.25% - 6.60%) = 0.65%
(5.6% - 6.60%) = -1.00%
(12.5% - 6.60%) = 5.90%
(1.0% - 6.60%) = -5.60%
Then, we square each deviation and take the average:
(0.0065^2 + 0.01^2 + 0.059^2 + 0.056^2)/4 = 0.0023
Therefore, the variance is 0.23% (or 0.0023 in decimal form). Thus, the best choice is B.

You Have a Sample of Returns Observations for the Malta