A stock has returns for five years of 14 percent, -16 percent, 12 percent, 23 percent, and 4 percent, respectively.The stock has an average return of ______ percent and a standard deviation of _____ percent.

Question

Quizplus · Accepted Answer

The average return is the sum of the returns divided by the number of years, which is (14 - 16 + 12 + 23 + 4) / 5 = 7.40%. The standard deviation is the square root of the variance, which is the average of the squared deviations from the mean. The variance is [(14 - 7.40)^2 + (-16 - 7.40)^2 + (12 - 7.40)^2 + (23 - 7.40)^2 + (4 - 7.40)^2] / (5 - 1) = 216.26, so the standard deviation is sqrt(216.26) = 14.72%.

A Stock Has Returns for Five Years of 14 Percent