Treasury bill returns are 5%,4%,3%,and 6% over four years.The standard deviation of returns of Treasury bills is:
A)1.51%
B)1.11%
C)1.00%
D)1.29%
E)1.43%

Question

Quizplus · Accepted Answer

To calculate the standard deviation, first we need to find the average return (mean) which is (5%+4%+3%+6%)/4 = 4.5%. Then we can calculate the deviation of each return from the average return:

- Deviation of 5%: 5% - 4.5% = 0.5%
- Deviation of 4%: 4% - 4.5% = -0.5%
- Deviation of 3%: 3% - 4.5% = -1.5%
- Deviation of 6%: 6% - 4.5% = 1.5%

Next, we square each deviation and sum them up: (0.5%^2 + (-0.5%)^2 + (-1.5%)^2 + 1.5%^2) = 0.605%

Then we divide by the number of observations (4) minus 1, and take the square root:

sqrt(0.605%/3) = 1.29%

Therefore, the standard deviation of Treasury bill returns is 1.29%. The best choice is D.

Treasury Bill Returns Are 5%,4%,3%,and 6% Over Four Years