What was the standard deviation of the market returns? (Note: Use the method for
ID: 2711319 • Letter: W
Question
What was the standard deviation of the market returns? (Note: Use the method for calculating variance and standard deviation described in Section 7-2 of the text.) (Do not round intermediate calculations. Round your answer to 1 decimal place.)
Calculate the average real return. (Negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 1 decimal place.)
Explanation / Answer
Year Nominal return % Mean Deviation fromMean Square of deviation from mean Year 2004 11.40 (0.92) 12.32 152 Year 2005 7.70 (0.92) 8.62 74 Year 2006 15.90 (0.92) 16.82 283 Year 2007 3.70 (0.92) 4.62 21 Year 2008 (43.30) (0.92) (42.38) 1,796 Total (4.60) 2,326 Average/year (0.92) Variance = 2,326 Standard deviation = Variance = 2326 = 48.22 Ans a. Std deviation = 48.22 Year Nominal return % Inflation % Real return % Year 2004 11.40 2.20 9.20 Year 2005 7.70 3.40 4.30 Year 2006 15.90 3.00 12.90 Year 2007 3.70 5.50 (1.80) Year 2008 (43.30) 0.50 (43.80) Total (19.20) Ans b. Average real return (3.84)
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