Question

Treasury bill returns are 66​%, 55​%, 44​%, and 77​% over four years. The standard deviation of returns of Treasury bills​ is:

Answer 1

Expected returns of Treasury bills

Expected returns of Treasury bills = Total Returns / Number of years

= [66 + 55 + 4% + 77] / 4

= 242 / 4

= 60.50%

Standard deviation of returns of Treasury bills

Variance of the Returns

Variance = [(66 – 60.50)² + (55 – 60.50)² + (44 – 60.50)² + (77 – 60.50)²] x ¼

= [30.25 + 30.25 + 272.25 + 272.25] x ¼

= 605 x ¼

= 151.25

Standard Deviation of the Returns

The Standard Deviation of the Returns is the Square Root of 151.25or (151.25)^1/2

= 12.30%

“Hence, the Standard deviation of returns of Treasury bill is 12.30%”