Question

The last four years of returns for a stock are as? follows: Year 1 2 3 4 Return negative 3.9?3.9?% 27.827.8?% 12.212.2?% 3.93.9?% a. What is the average annual? return? b. What is the variance of the? stock's returns? c. What is the standard deviation of the? stock's returns?

Answer 1

a. Average annual return is 10.0%

b.Variance is 1.4%

c. Standrad deviation is 11.7%

Working:

Year	Return	Average Return
	a	b	(a-b)^2
1	-3.9%	10.0%	1.9%
2	27.8%	10.0%	3.2%
3	12.2%	10.0%	0.0%
4	3.9%	10.0%	0.4%
Total	40.0%		5.5%
Average return		=	Total return/no. of years
		=	40.0%	/	4
		=	10.0%
Variance		=	5.5%	/	4
		=	1.4%
Standard Deviation		=	?Variance
		=	?1.4%
		=	11.7%