CFA Level I · CFA Level I Exam · Statistical Distributions for Financial Asset Prices and Returns
A continuous uniform random variable is defined over the interval from 10 to 22. The variance of this distribution is closest to:
The variance is about 12.0. For a continuous uniform distribution the variance equals the squared range divided by 12. The range is 12, its square is 144, and dividing by 12 gives a variance of 12.0.
- A6.0
- B12.0Correct
- C24.0
Explanation
The variance of a continuous uniform distribution is (b − a)^2/12. Here (22 − 10)^2/12 = 144/12 = 12.0. The value 6.0 results from dividing the range by 2 instead of squaring, and 24.0 from dividing 144 by 6.
Did you get it right without looking?
One question tells you little. A timed set on Statistical Distributions for Financial Asset Prices and Returns shows your real accuracy, how long you take and where you lose marks.
More Statistical Distributions for Financial Asset Prices and Returns questions
- An analyst standardizes a normally distributed return by subtracting its mean and dividing by its standard deviation. The resulting standard…
- An analyst estimates an option's value with a Monte Carlo simulation of 10,000 trials and obtains a standard error of 0.40. To cut the stand…
- A stock priced at 80 follows a two-period binomial tree. Each period it rises by a factor u = 1.10 or falls by a factor d = 0.90 (the up pro…
- A continuous uniform random variable X lies between 0 and 80. An analyst wants the value x such that the probability that X exceeds x is 15%…
- A stock's continuously compounded returns are 6% in the first year and -2% in the second year, with an initial price of 50. Assuming no divi…
- Annual returns on a fund are normally distributed with a mean of 8% and a standard deviation of 10%. Using the approximate rule that about 9…