Financial Risk Manager Part 1
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What is the difference between the biased and unbiased estimators of the variance?
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Community
NNikitesh
A
5,867.50
B
5,503.90
C
5,767.39
D
5,867.87
Explanation:
The correct answer is C) 5,767.39. This question appears to be about calculating the difference between biased and unbiased variance estimators. The biased estimator uses n in the denominator (population variance formula), while the unbiased estimator uses n-1 (sample variance formula). The difference between these two estimators for the given dataset would be calculated as:
Biased variance = Σ(x - μ)² / n Unbiased variance = Σ(x - μ)² / (n-1)
Difference = Σ(x - μ)² * (1/(n-1) - 1/n)
Given the profit data provided in the table, the calculation yields 5,767.39 as the difference between these two variance estimators.
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