Issue calculating MAD on BA II plus with a negative value.

CFA Level I
#1

The question is as follows:

What is the MAD and variance of the sample investment returns given below:

Year Return

2004 8%

2005 9%

2006 -7%

2007 5%

Answer: B - MAD=5.375%, VaR=54.25

I cannot get the correct figure on my BA II plus for MAD. I know I am entering the equation in correctly but I keep getting the answer as zero. I think the problem may lie in how I am entering in the value for 2006 (-7%) into my calculator but I am not sure.

Any help here would be appreciated. I have had a look through the elan guides text book but all the values are positive in that example and the solution they have provided for this question doesn’t explicitly tell you how to enter the values on the calculator.

#2

mean = 8 + 9 + (-7) + 5 / 4 = 3.75

MAD = [|8-3.75| + |9-3.75| + |-7-3.75| + |5-3.75|]/4 = 21/4 = 5.375

#3

That doesn’t really help me much. I am still getting 0 as my answer.

I am entering it into the calculator like so:

(8-3.75) + (9-3.75) + (7 [+/-] - 3.75) + (5-3.75) = 0

#4

Never mind I got it!

I just remembered it’s absolute values.

Silly me!

#5

You should use same key sequence as you mentioned above … but when you get a negative value as soon as you use the closing parenthesis ,use (+/-) sign to make that term positive (absolute value) ie

(8-3.75) + (9-3.75) + (7[+/-] - 3.75) [+/-] + (5-3.75) will be your numerator

4 is the denomiator

Answer MAD = 5.375

Hope this helps :slight_smile:

#6

^ sorry …That was a late reply …