Question

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The last four years of returns for a stock are as shown here:

year 1, -4.4%

year 2 28.4%

year 3 12.4%

year 4 3.8%

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?

Note:

Notice that the average return and standard deviation must be entered in percentage format. The variance must be entered in decimal format.

round to five decimal places

Answer #1

**I am thinking average return and standard deviation
should be entered with 2 decimals and variance should have 5
decimals. If average return and standard deviation should also be
entered with 2 decimals, put it in comments and i will re do the
question.**

a)

Average return = (-0.044 + 0.284 + 0.124 + 0.038) / 4

Average return = 0.402 / 4

**Average return = 0.1005 or 10.05%**

2)

Variance = [(-0.044 - 0.1005)^{2} + (0.284 -
0.1005)^{2} + (0.124 - 0.1005)^{2} + (0.038 -
0.1005)^{2}] / 4 - 1

Variance = [0.02088 + 0.03367 + 0.00055 + 0.01918] / 3

**Variance = 0.02476**

3)

Standard deviation = (0.02476)^{1/2}

**Standard deviation = 0.1574 or 15.74%**

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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?
Note: Notice that the average return and standard deviation
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1
2
3
4
-3.5%
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Answer%. (Round to two decimal places.)
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___________________________________
Year Return
___________________________________
2016
–0.10 (or –10%)
2017
0.10 (or 10%)
2018
0.15 (or 15%)
2019
0.25 (or 25%)
__________________________________
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years are provided below.
___________________________________
Year Return
___________________________________
2016
–0.10 (or –10%)
2017
0.10 (or 10%)
2018
0.15 (or 15%)
2019
0.25 (or 25%)
__________________________________
a) Find the holding period return of the stock over the
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b) Compute the arithmetic average return of the stock over the
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