You’ve observed the following returns on Crash-n-Burn Computer’s stock over the

Question

You’ve observed the following returns on Crash-n-Burn Computer’s stock over the past five years: 5 percent, -11 percent, 25 percent, 15 percent, and 14 percent.

  

   

What was the variance of Crash-n-Burn’s returns over this period? (Do not round intermediate calculations.)

   

What was the standard deviation of Crash-n-Burn’s returns over this period? (Do not round intermediate calculations.)

You’ve observed the following returns on Crash-n-Burn Computer’s stock over the past five years: 5 percent, -11 percent, 25 percent, 15 percent, and 14 percent.

Explanation / Answer

arithmetic average retur=Total returns/Total tme period

=(5-11+25+15+14)/5=9.6%

SD=[Total (return-mean)^2/(time period-1)]^(1/2)

=13.52%(Approx)

Variance=SD^2

=0.01828

Return (return-mean)^2 5 (5-9.6)^2=21.16 -11 (-11-9.6)^2=424.36 25 (25-9.6)^2=237.16 15 (15-9.6)^2=29.16 14 (14-9.6)^2=19.36 Total=731.2%

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