The annual standard deviation of an asset's returns is 15%.What is the standard deviation of the average annual return on a five year investment in this asset,assuming there is no serial correlation in the returns?

Question

Quizplus · Accepted Answer

The standard deviation of the average annual return on a five year investment in this asset is equal to the annual standard deviation of the asset divided by the square root of the number of years in the investment, that is, 15%/sqrt(5) = 6.71%. Therefore, the answer is D).

The Annual Standard Deviation of an Asset's Returns Is 15