Over the last three years you earned 5%, 7%, and 9%. What is the standard deviation of your returns?

Question

Quizplus · Accepted Answer

The standard deviation is a measure of the dispersion of a set of data. It is calculated by taking the square root of the variance. The variance is calculated by finding the average of the squared differences between each data point and the mean. In this case, the mean is (5% + 7% + 9%) / 3 = 7%. The variance is [(5% - 7%)^2 + (7% - 7%)^2 + (9% - 7%)^2] / 3 = 4%. The standard deviation is the square root of 4%, which is 2%.

Over the Last Three Years You Earned 5%, 7%, and 9