Question

A stock had returns of 18.42 percent, 21.67 percent, −14.81 percent, 8.99 percent, and 28.06 percent...

A stock had returns of 18.42 percent, 21.67 percent, −14.81 percent, 8.99 percent, and 28.06 percent for the past five years. What is the standard deviation of the returns?

a. 16.73%

b. 13.38%

c. 27.98%

d. 20.91%

e. 2.80%

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Homework Answers

Answer #1

Average return=Total return/Total time period

=(18.42+21.67-14.81+8.99+28.06)/5=12.466%

Return (Return-Average Return)^2
18.42 (18.42-12.466)^2=35.450116
21.67 (21.67-12.466)^2=84.713616
-14.81 (-14.81-12.466)^2=743.980176
8.99 (8.99-12.466)^2=12.082576
28.06 (28.06-12.466)^2=243.172836
Total=1119.39932%

Standard deviation=[Total (Return-Average Return)^2/(Time period-1)]^(1/2)

=[1119.39932/(5-1)]^(1/2)

=[1119.39932/4]^(1/2)

=16.73%(Approx)

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