Calculating Returns and Variability Using the following returns, calculate the a
ID: 2650251 • Letter: C
Question
Calculating Returns and Variability
Using the following returns, calculate the average returns, the variance, and the standard deviations for X and Y. For this question, you may use the spreadsheet template on the text support website: http://highered.mcgraw-hill.com/sites/0078034752/student_view0/index.html.
Returns
----------------------
Year X Y
----------------------------------------------------------
1 14% 32%
2 -21 -5
3 17 17
4 9 -12
5 23 45
Explanation / Answer
Average Return
X=14+21+17+9+23/5 = 8.4%
Y= 32-5+17-12+45/5 = 15.4%
calculation of variance
1. (14-8.4)2 =31.36
2. (-21-8.4)2=864.36
3. (17-8.4)2=73.96
4. (9-8.4)2= .36
5. (23-8.4)2= 213.16
Variance=31.36+864.36+73.96+.36+213.16/5 = 23.628
Standard Deviation= SQRT 23.628 =15.38
Y
Variance
1. (32-15.4)2= 275.56
2. (-5-15.4)2 = 416.16
3. (17-15.4)2 = 2.56
4. (-12-15.4)2= 750.76
5. (45-15.4)2= 876.16
Variance =275.56+416.16+2.56+750.76+876.16/5 = 464.24
Standard Deviation = SQRT 464.24 =21.54
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