Florida Company (FC)and Minnesota Company (MC)are both service companies.Their stock returns for the past three years were: FC: -5%,15%,20%; MC: 8%,8%,20%.
Calculate the standard deviations of returns for FC and MC.

Question

Quizplus · Accepted Answer

To calculate the standard deviation of returns, we need to use the following formula:

Standard deviation = √[(Σ(returns - mean)^2)/n]

where Σ is the sum of, returns are the stock returns for the given years, mean is the average of returns, and n is the number of years.

For FC: 
- Mean = (-5% + 15% + 20%)/3 = 10% 
- Standard deviation = √[((-5% - 10%)^2 + (15% - 10%)^2 + (20% - 10%)^2)/3] = 13.2%

For MC: 
- Mean = (8% + 8% + 20%)/3 = 12% 
- Standard deviation = √[((8% - 12%)^2 + (8% - 12%)^2 + (20% - 12%)^2)/3] = 6.9%

Therefore, the best choice is C, FC: 13.2% and MC: 6.9%.

Florida Company (FC)and Minnesota Company (MC)are Both Service Companies