- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 3. Statistical Measures of Asset Returns
- Subject 2. Measures of Dispersion
CFA Practice Question
Ten experts rated a newly developed chocolate chip cookie on a scale of 1 to 50. Their ratings were: 34, 35, 41, 28, 26, 29, 32, 36, 38, and 40. What is the mean absolute deviation?
B. 4.12
C. 12.67
A. 8.00
B. 4.12
C. 12.67
Correct Answer: B
The mean is 33.9. The mean absolute deviation is the absolute value of the deviation from the mean. (0.1 + 1.1 + 7.1 + 5.9 + 7.9 + 4.9 + 1.9 + 2.1 + 4.1 + 6.1)/10 = 41.2/10 = 4.12
User Contributed Comments 12
| User | Comment |
|---|---|
| sunilcfa | How to calculate this on a HP 12C? |
| mikeing | Problem is very time consuming. Is there a quicker way to solve? |
| kamin | add all than div 10 diff add all than div 10 is =mean absolute deviation |
| julescruis | no quick way to do this, this should not take more than 1,5 minutes, in line with exam conditions. Guessing the answer is also a good way |
| mariam84 | how to calculate using BA calculator? |
| wacarinci | you need to know the concept, but there will not be questions on exam that requires this much time to calculate. I have sat for exam before, you will be amazed how little you need your calculator. |
| linhtran32 | i think it would be a bit faster if u group the data MAD=[(34+35+41+36+38-33.9*6)+(33.9*4-28-26-29-32)]/10 |
| rsanfo | If you guesstimate the mean as 34, you can quickly add up the deviations in your head: 0+1+7+6+8+5+2+2+4+6=41 so answer is around 4.1 which rules out A and C... |
| ThomasDess | Or this way: once you have the mean = 33.9 you could find the extreme deviations: min xi = 26 => 26 - 33.9 = -7.9 max xi = 41 => 41 - 33.9 = 7.1 so the mean abs deviation would be always the abs of some value from this int (-7.9; 7.1) which, in this case, rules out A and C |
| harpalani | I agree with Wacarinci. Use of the calculator is hardly required in exam as most questions test the concepts. |
| 2014 | No need to worry about MAD. I wasted my entire day. for a simple thing. As wacarni and Harpalani said minimal use of calculator. In Textbook, it says that MAD is always less or equal to Standard deviation. The standard deviation for this question is 5.10. So, Other two answers are elimminated. So, your answer should be B - 4.12. |
| schweitzdm | Wouldn't it take just as much time to calculate standard deviation as it would for MAD? |