The return on your portfolio over the last 5 years were -5%,20%,0%,10% and 5%.What is the standard deviation of your return?
A)2.74%
B)5.21%
C)9.62%
D)10.12%
E)12.70%

Question

Quizplus · Accepted Answer

To calculate standard deviation, we first need to calculate the average return of the portfolio over the last 5 years:

Average return = (-5% + 20% + 0% + 10% + 5%) / 5
= 4%

Next, we calculate the deviation of each return from the average return:

-5% - 4% = -9%
20% - 4% = 16%
0% - 4% = -4%
10% - 4% = 6%
5% - 4% = 1%

To calculate the standard deviation, we need to square each deviation, sum them up, divide by the number of returns (5), and then take the square root:

Standard deviation = SQRT [((-9%)^2 + (16%)^2 + (-4%)^2 + (6%)^2 + (1%)^2) / 5]
= 0.0962 or 9.62%

Therefore, the correct answer is C.

The Return on Your Portfolio Over the Last 5 Years