You have a sample of returns observations for the Malta Stock Fund.The 4 returns are 0.0725,0.056,0.125,0.010.What is the average return and variance of these returns?
A)6.50%; .00169
B)6.60%; .00225
C)6.60%; .000475
D)26.35%; .00676
E)None of the above.

Question

Quizplus · Accepted Answer

The average return can be found by adding up all returns and dividing by the number of observations:
(0.0725 + 0.056 + 0.125 + 0.010) / 4 = 0.065
So the average return is 6.5%.

To find the variance, first calculate the deviations from the mean:
(-0.0075, -0.009, 0.06, -0.055)
Then square each deviation and add up the squared deviations:
0.00005625 + 0.000081 + 0.0036 + 0.003025 = 0.0067625
Finally, divide the sum by the number of observations minus one:
0.0067625 / 3 = 0.00225417
So the variance is 0.00225, which is closest to choice B.

You Have a Sample of Returns Observations for the Malta