What is the standard Deviation of the stock\'s return? Year 1 2 3 4 Return -3.80

Question

What is the standard Deviation of the stock's return?

Year 1 2 3 4 Return -3.80% 28.40% 12.50% 3.80% The last four years of returns for a stock are as shown here a. What is the average annual return? b. What is the variance of the stock's returns? c. What is the standard deviation of the stock's returns? Note: Notice that the average return and standard deviation must be entered in percentage format. The variance must be entered in decimal format. a. What is the average annual return? The average return is 10.23 %. (Round to two decimal places.) b. What is the variance of the stock's returns? The variance of the returns is 0.01912. (Round to five decimal places.) c. What is the standard deviation of the stock's returns? The standard deviation is | %. (Round to two decimal places.)

Explanation / Answer

Variance = 1/n[(R1-ER))^2 + (R2-ER)^2+(R3-ER)^2+(R4-ER)^4]

=1/4 [(-.038 - .1023)^2+ (.284-.1023)^2+ (.125-.1023)^2+ (.038-.1023)^2]

    =1/4[.019684+ .033015+ .000515+ .004134]

      =1/4[ .05734876]

       = .01434

standard deviation = square root of variance

       = SR( .01434 ]

        = .1197 Or 11.97%

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