You find a certain stock that had returns of 18 percent, 25 percent, 21 percent,

Question

You find a certain stock that had returns of 18 percent, 25 percent, 21 percent, and 7 percent for four of the last five years. The average return of the stock over this period was 9.6 percent. What was the stock’s return for the missing year? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.)

Stock’s return %

What is the standard deviation of the stock’s returns? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Standard deviation %

Explanation / Answer

Given that the average return of the stock for the period of 5 years is 9.6% Assuming the missing stock return as X (18% - 25% + 21% + 7% + X)/5 = 9.6% Hence, 21% + X = 9.6% X 5 = 48% Hence, X = 48% - 21% = 27%. The standard deviation of the stock's returns will be the square root of the variance of the return The Variance of the Return is 0.043 Hence, the Standard Deviation is 0.207

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