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Anderson stock had returns of 6%, -22%, 18%, 12%, and -2% over the past five years....

Anderson stock had returns of 6%, -22%, 18%, 12%, and -2% over the past five years. What is the standard deviation of Anderson's returns? A. 11.68 percent B. 10.21 percent C. 18.74 percent D. 13.49 percent E. 15.52 percent

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Answer #1

Answer is 15.52%

Returns over the past 5 years are 6%, -22%, 18%, 12% and -2%

Expected Return = [0.06 + (-0.22) + 0.18 + 0.12 + (-0.02)] / 5
Expected Return = 0.12 / 5
Expected Return = 0.024 or 2.40%

Variance = [(0.06 - 0.024)^2 + (-0.22 - 0.024)^2 + (0.18 - 0.024)^2 + (0.12 - 0.024)^2 + (-0.02 - 0.024)^2] / 4
Variance = 0.09632 / 4
Variance = 0.02408

Standard Deviation = (0.02408)^(1/2)
Standard Deviation = 0.1552 or 15.52%

So, standard deviation of Anderson's returns is 15.52%

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