Question

Consider the following 2 stocks: Closing Prices Stock A Stock B Year 1 33.75 112.09 Year...

Consider the following 2 stocks:

Closing Prices

Stock A

Stock B

Year 1

33.75

112.09

Year 2

31.69

115.74

Year 3

29.17

115.89

Year 4

25.64

120.75

Year 5

27.97

125.12

Year 6

30.36

127.46

Year 7

32.74

110.49

Year 8

35.09

111.26

Year 9

31.89

106.99

Year 10

33.56

105.17

Year 11

30.12

108.25
  1. Calculate standard deviation of returns for stock B
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Answer #1

Answer : Standard deviation of return of Stock B = 6.99

Calculation of standard deviation of returns of stock B

Returns Deviation from mean (Return - 114.47) Square of deviation from mean
112.09 -2.38 5.6644
115.74 1.27 1.6129
115.89 1.42 2.0164
120.75 6.28 39.4384
125.12 10.65 113.4225
127.46 12.99 168.7401
110.49 -3.98 15.8404
111.26 -3.21 10.3041
106.99 -7.48 55.9504
105.17 -9.3 86.49
108.25 -6.22 38.6884

Calculation of mean = Total of return of stock B / No. Of returns

= 1259.21 / 11

= 114.47

Standard deviation = ( Sum of sqaure of deviation from mean / No. If returns ) ^ 1/2

= (538.168 / 11 ) ^ 1/2

= 48.92 ^1/2

= 6.99

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