Problema Solution
1) A stock had returns of 11 percent, -18 percent, -21 percent, 5 percent, and 34 percent over the past five years. What is the standard deviation of these returns?
a. 18.74 percent
b. 20.21 percent
c. 20.68 percent
d. 22.60 percent
e. 23.49 percent
Answer provided by our tutors
First we find the mean:
(11 - 18 - 21 + 5 + 34)/5 = 2.2%
Then for each number: subtract the Mean and square the result
(2.2 - 11)^2 = 77.44
(2.2 - (-18))^2 = 408.04
(2.2 - (-21))^2 = 538.24
(2.2 - 5)^2 = 7.84
(2.2 - 34)^2 = 1011.24
Next find the mean of those squared differences
(77.44 + 408.04 + 538.24 + 7.84 + 1011.24)/5 = 408.56
And finally we take square root of 408.56 and we find the standard deviation = 20.21%.
The answer is b. 20.21 percent.