Question

# You have the following information on the return to three stocks over the past 4 years....

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. 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.

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