Question

You've observed the following returns on Mary Ann Data Corporation's stock over the past five years: 34.50 percent, 16.50 percent, 19.50 percent, -21.50 percent, and 8.50 percent. a. What was the arithmetic average return on Mary Ann's stock over this five-year period? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Arithmetic average return 7 % b-1. What was the variance of Mary Ann's returns over this period? (Do not round intermediate calculations. Round the final answer to 6 decimal places.) Variance b-2. What was the standard deviation? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Standard deviation

Answer 1

Answer to a.

Arithmetic average return = (34.50+16.50+19.50-21.50+8.50)/5 = 57.50/5=11.50%

Answer to b-1.

Variance computation

(a)Year	(b)Annual return (%)	(c)Average return (%)	(d)Annual return minus Average return	Square of column d
1	34.50	11.50	23.00	529.00
2	16.50	11.50	5.00	25.00
3	19.50	11.50	8.00	64.00
4	-21.50	11.50	-33.00	1089.00
5	8.50	11.50	-3.00	9.00
Sum of above			0	1716.00

Variance = Sum of squares as arrived above / n-1 = 1716/(5-1)=429

Hence, variance =429.00

Answer to b-2.

Standard deviation = Square root of variance = 20.71