Mean Absolute Deviation of Debt-to-Equity Ratios | CFA® Level 1 Exam Prep

Mean Absolute Deviation of Debt-to-Equity Ratios

Prev Question Next Question

Question

You are examining a group of 3 stocks within an industry. The industry average debt-to-equity ratio is expected to be 40%. For these stocks, the average debt-to- equity ratios have been 50%, 40%, and 30%. What is the mean absolute deviation of debt-to-equity ratios from the industry average?

Answers

Explanations

Click on the arrows to vote for the correct answer

A. B. C. D.

B

The mean absolute deviation = the sum of (as i goes from 1 to n) of the absolute value of (X_i - Xbar), divided by n. Here, we have [|50% - 40%| + |40% - 40%| + |

30% - 40%|]/3 = [10% + 0% + 10%] / 3 = 20%/3 = 6.67%.

Prev Question Next Question