A certain financial analyst defines the “volatility” of a stock during a given week to be the result of the following

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VJesus12: Legendary Member; Posts: 2276; Joined: Sat Oct 14, 2017 6:10 amFollowed by: 3 members

by VJesus12 » Mon Sep 21, 2020 7:12 am

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A certain financial analyst defines the “volatility” of a stock during a given week to be the result of the following procedure: find the absolute value of the difference in the stock's closing price for each pair of consecutive days in the week and then find the average (arithmetic mean) of these 4 values. What is the volatility of Stock X during the week shown in the table?

A. 0.50
B. 1.80
C. 2.00
D. 2.25
E. 2.50

Answer: D

Source: Official Guide

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DHRJ007: Senior | Next Rank: 100 Posts; Posts: 31; Joined: Thu Sep 17, 2020 9:27 amFollowed by: 1 member

Re: A certain financial analyst defines the “volatility” of a stock during a given week to be the result of the followin

by DHRJ007 » Mon Sep 21, 2020 7:43 am

V=(|19−21|+|22−19|+|24.5−22|+|23−24.5|4 )/4

V=(2+3+2.5+1.5)/4
=9/4=2.25

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Brent@GMATPrepNow: GMAT Instructor; Posts: 16207; Joined: Mon Dec 08, 2008 6:26 pmFollowed by: 1268 members; Location: Vancouver, BC; Thanked: 5254 times; GMAT Score:770

Re: A certain financial analyst defines the “volatility” of a stock during a given week to be the result of the followin

by Brent@GMATPrepNow » Sun Mar 06, 2022 6:19 am

VJesus12 wrote: ↑
Mon Sep 21, 2020 7:12 am
2020-04-28_0119.png

A certain financial analyst defines the “volatility” of a stock during a given week to be the result of the following procedure: find the absolute value of the difference in the stock's closing price for each pair of consecutive days in the week and then find the average (arithmetic mean) of these 4 values. What is the volatility of Stock X during the week shown in the table?

A. 0.50
B. 1.80
C. 2.00
D. 2.25
E. 2.50

Answer: D

Source: Official Guide

Absolute difference from Monday to Tuesday = |19 - 21| = 2
Absolute difference from Tuesday to Wednesday = |22 - 19| = 3
Absolute difference from Wednesday to Thursday = |24.5 - 22| = 2.5
Absolute difference from Thursday to Friday = |23 - 24.5| = 1.5

Average of the absolute differences = (2 +3 + 2.5 + 1.5)/4 = 9/4 = 2.25

Answer: D

Brent Hanneson - Creator of GMATPrepNow.com

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