Question

ABC share has the following return for the respective years as shown in the table except for 2018. If the average return of the stock is 9 percent.

2015	2016	2017	2018	2019
12.5%	9.5%	6.5%	??	8.5%

Required:

1) Find the stock’s return for the missing year?

2)Find the standard deviation of the stock’s return?

Answer 1

1) Average return = Return for year 2015 + Return for year 2016 + Return for year 2017 + Return for year 2018 + Return for year 2019 / 5

Thus 9% = 12.5%+9.5%+6.5% + Return for year 2018 + 8.5% / 5

9% = 37% + Return for year 2018 / 5

45% = 37% + Return for year 2018

Return for year 2018 = 8%

2) Statement showing Standard deviation

Year	Return(x)	(x - X)	(x - X)^2
2015	12.5%	4%	0.12%
2016	9.5%	1%	0.003%
2017	6.5%	-3%	0.06%
2018	8.0%	-1%	0.01%
2019	8.5%	0%	0.002%
			0.20%

X = Average return = 9%

Standatd Deviation = (0.20%/5 )^0.5

=0.04%^0.5

^{= 2%}