The sum of squares = .642385816 The standard deviation of returns is: (correct a

ID: 2731853 • Letter: T

Question

The sum of squares = .642385816

The standard deviation of returns is: (correct answer: 26.72%)

The variance of return is: (correct answer: .071376)

MY QUESTION IS HOW DO I SOLVE FOR: The standard deviation of return and the variance of return. CAN ONLY USE A BASIC CALCULATOR. I NEED STEP BY STEP. I KEEP GETTING 25.35% FOR STANDARD DEVIATION AND IT IS WRONG.

END OF YEAR STOCK PRICE RETURNS 2003 253.51 - 2004 364.00 43.58% 2005 317.05 -12.90% 2006 480.10 51.43% 2007 491.10 2.29% 2008 299.00 -39.12% 2009 340.00 13.71% 2010 378.13 11.21% 2011 414.67 9.66% 2012 433.42 4.52% 2013 580.35 33.90%

Explanation / Answer

END OF YEAR

STOCK PRICE

RETURNS

Return - Average return

(Return - Average return)2

2003

$253.51

2004

$364.00

43.58%

31.75%

0.100819

2005

$317.05

-12.90%

-24.73%

0.061147

2006

$480.10

51.43%

39.60%

0.156832

2007

$491.10

2.29%

-9.54%

0.009097

2008

$299.00

-39.12%

-50.95%

0.259570

2009

$340.00

13.71%

1.88%

0.000354

2010

$378.13

11.21%

-0.62%

0.000038

2011

$414.67

9.66%

-2.17%

0.000470

2012

$433.42

4.52%

-7.31%

0.005341

2013

$580.35

33.90%

22.07%

0.048717

118.28%

0.642386

Variance = Sum of (Return – Average return)2 / (n-1) = 0.642386/9 = 0.071376

Standard deviation = Square root of Variance = (0.071376)1/2 = 0.2672 = 26.72%