Consider the following five monthly returns: Calculate the arithmetic average mo

Question

Consider the following five monthly returns: Calculate the arithmetic average monthly return over the period. Calculate the geometric average monthly return over this period Calculate the monthly variance over this period Calculate the monthly standard deviation over this period Calculate the arithmetic average monthly return over this period The arithmetic average is (Round to two decanal places) Calculate the geometric average monthly return over this period The geometric average is (Round to two decimal places)

Explanation / Answer

a)Arithmetic average monthly Return 0.04+(-0.03)+0.03+0.07+(-0.02)/5 0.018 or 1.8% b)Geometric average monthly Return 5underroot[(1+.04)*(1+(-0.03))*(1+0.03)*(1+0.07)*(1+(-0.02))]-1 5 underroot(1.08956)-1 1.73% c) Calculation of Standard Deviation Return Given ret-Avg return(D) D^2 0.04 0.022 0.000484 -0.03 -0.048 0.002304 0.03 0.012 0.000144 0.07 0.052 0.002704 -0.02 -0.038 0.001444 average=.018 Total 0.00708 SD=underroot D^2/N Underroot 0.00708/5 0.03763 d)Calculation of Variance Variance= Sd^2 .03763^2 0.01416

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