Question

You have the following information on the return to three stocks over the past 4 years. USE THIS INFORMATION TO ANSWER QUESTIONS 8 THROUGH 17

Ford GE Amazon

2016 10 - 6 2

2017 - 5 13 6

2018 14 - 5 1

2019 - 7 18 7

First question: What are the sample mean returns for each of these stocks?

	a.	Sample mean of Ford = 16 Sample mean of GE = 20 Sample mean of Amazon = 16
	b.	sample mean of Ford = 3 sample mean of GE = 5 sample mean of Amazon = 6
	c.	Sample mean of Ford = 3 Sample mean of GE =5 Sample mean of Amazon = 4
	d.	none of these

What are the sample variances in returns of the three stocks?

	a.	Sample variance of Ford = 10.551 Sample variance of GE = 14.583 Sample variance of Amazon = 2.944
	b.	sample variance of Ford = 111.333 sample variance of GE = 212.666 sample variance of Amazon = 89.666
	c.	sample variance of Ford = 111.333 sample variance of GE = 151.333 sample variance of amazon = 8.666
	d.	None of these

Answer 1

ANSWER : 1. C & 2. C

1. Computation of sample mean.

YEAR	FORD	GE	AMAZON
2016	10	-6	2
2017	-5	13	6
2018	14	-5	1
2019	-7	18	7
TOTAL	12	20	16

Sample mean of Ford = 12/4 = 3

Sample mean of GE = 20/4 = 5

Sample mean of Amazon = 16/4 = 4

2. Computation of sample variance.

YEAR	FORD	GE	AMAZON
2016	(10 - 3)2 = 49	(-6 - 5)2 = 121	(2 - 4)2 = 4
2017	(-5 - 3)2 = 64	(13 - 5)2 = 64	(6 - 4)2 = 4
2018	(14 - 3)2 = 121	(-5 - 5)2 = 100	(1 - 4)2 = 9
2019	(-7 - 3)2 = 100	(18 - 5)2 = 169	(7 - 4)2 = 9
TOTAL	334	454	26

Sample variance of Ford = 334/3 = 111.333

Sample variance of GE = 454/3 = 151.333

Sample variance of amazon = 26/3 = 8.666

NOTE : Since it is sample variance therefore, the total has been divided by n-1 i.e. 3.