CMA Intermediate · Financial Management and Business Data Analytics · Data Analysis and Modelling
Daily returns (in %) of a stock over four days are 2, 4, 6 and 8. Treating these four days as the entire population, what is the standard deviation?
The population standard deviation is 2.24. The mean is 5, the squared deviations sum to 20, variance is 20 divided by 4 equals 5, and its square root is about 2.24. Dividing by n-1 would wrongly give the sample figure.
- A2.24Correct
- B2.58
- C5.00
- D20.00
Explanation
Mean = 20/4 = 5. Squared deviations: 9, 1, 1, 9 = 20. Population variance = 20/4 = 5, so SD = √5 = 2.24. Using n-1 gives 6.67 variance and SD 2.58, which is the sample measure and wrong here.
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