A stock price is 20,22,19,21,24,and 24 on six successive Fridays.Which of the following is closest to the volatility per annum estimated from this data?
A) 50%
B) 60%
C) 70%
D) 80%

Question

Quizplus · Accepted Answer

The price relative for the first week is 22/20 or 1.1.The natural log of the price relative is ln(1.1)or 0.09531.Similarly the ln of the price relatives for the other weeks are -0.1466,0.1001,0.1335,and 0.The standard deviation of 0.09531,-0.1466,0.1001,0.1335,and 0 is 0.1138.The volatility per week is therefore 11.38%.This corresponds to a volatility per year of 0.1138 multiplied by the square root of 52 or about 82%.The answer is therefore D.

A Stock Price Is 20,22,19,21,24,and 24 on Six Successive Fridays