You have observed the returns for an investment in Telstra shares for the last five years.This shows returns of 23 per cent,-17 per cent,8 per cent,22 per cent,and 3 per cent.The stock has an average return of ______ per cent and a standard deviation of _____ per cent.

Question

Quizplus · Accepted Answer

To calculate the average return, we need to sum all the returns and divide by the number of years:

(23 - 17 + 8 + 22 + 3) / 5 = 7.8

To calculate the standard deviation, we can use the following formula:

σ = sqrt [ Σ ( xi - μ )² / ( N - 1 ) ]

Where σ is the standard deviation, Σ is the sum of all values, xi is each individual value, μ is the mean, and N is the number of values.

Plugging in the values, we get:

σ = sqrt [ ((23-7.8)² + (-17-7.8)² + (8-7.8)² + (22-7.8)² + (3-7.8)²) / (5-1) ]

σ = sqrt [ (1893.04 + 4225.64 + 0.16 + 341.44 + 23.04) / 4 ]

σ = sqrt [ 1635.32 / 4 ]

σ = sqrt [ 408.83 ]

σ ≈ 16.36

Therefore, the answer is C) 7.80; 16.36.

You Have Observed the Returns for an Investment in Telstra