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Sun Corporation Has Had Returns of -6 Percent, 16 Percent

Question 39

Multiple Choice

Sun Corporation has had returns of -6 percent, 16 percent, 18 percent, and 28 percent for the past four years.Calculate the standard deviation of the returns using the correction for the loss of a degree of freedom shown below.When variance is estimated from a sample of observed returns, we add the squared deviations and divide by N -1, where N is the number of observations.We divide by N -1 rather than N to correct for a loss of a degree of freedom.The formula is. Variance(r~m) =1N1t=1N(r~mtrm) 2\operatorname { Variance } \left( \tilde { r } _ { m } \right) = \frac { 1 } { N - 1 } \sum _ { t = 1 } ^ { N } \left( \tilde { r } _ { m t } - r _ { m } \right) ^ { 2 } Where is the market return in period t and rm is the mean of the values of rmt.


A) 11.6 percent
B) 14.3 percent
C) 13.4 percent
D) 14.0 percent

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