Question

Given the​ holding-period returns shown​ here, calculate the average returns and the standard deviations for the Kaifu Corporation and for the market. MONTH KAIFU CORP. MARKET

1 5​% 3​%

2 7​%    3​%

3 1​%    1​%

4 2​% -3​%

a. The average monthly return for Kaifu Corporation is %. ​(Round to two decimal​ places.)

The average monthly return for the market is %. ​(Round to two decimal​ places.)

b. The standard deviation for Kaifu Corporation is ​%. ​(Round to two decimal​ places.)

The standard deviation for the market is %. ​(Round to two decimal​ places.)

Answer 1

MONTH	KAIFU (RK)	(RK - ER)2	MARKET (RM)	(RM - ER)2
1	5	(5 - 3.75)2 = 1.5625	3	(3 - 1)2 = 4
2	7	(7 - 3.75)2 = 10.5625	3	(3 - 1)2​​​​​​​ = 4
3	1	(1 - 3.75)2 = 7.5625	1	(1 - 1)2​​​​​​​ = 0
4	2	(2 - 3.75)2 = 3.0625	-3	(-3 - 1)2​​​​​​​ = 16
	15	22.75	4	24

(a)

Average monthly return for Kaifu Corporation = 15/4 = 3.75%

Average monthly return for the market = 4/4 = 1%

​​​​​​​(b)

Standard deviation for Kaifu Corporation = √22.75/4 = √5.6875 = 2.38%

Standard deviation for the market = √24/4 = √6 = 2.45%