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

[VJesus12]

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

[DHRJ007]

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

[Brent@GMATPrepNow]

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