Macro Corporation has had the following returns for the past three years, -10%, 10%, and
30%) Calculate the standard deviation of the returns.
A) 10%
B) 20%
C) 30%
D) None of the above

Question

Quizplus · Accepted Answer

To calculate the standard deviation of returns, we need to take the following steps:

1. Find the average return: 
(-10% + 10% + 30%) / 3 = 10%

2. Subtract the average return from each individual return: 
-10% - 10% = -20% 
10% - 10% = 0% 
30% - 10% = 20%

3. Square each of the differences: 
(-20%)^2 = 400% 
0%^2 = 0% 
20%^2 = 400%

4. Find the average of the squared differences: 
(400% + 0% + 400%) / 3 = 266.67%

5. Take the square root of the average: 
√266.67% = 16.33%

Therefore, the standard deviation of the returns is 16.33%, which is closest to choice B (20%).

Macro Corporation Has Had the Following Returns for the Past