What is the expected return and the standard deviation of returns if over the past four...

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What is the expected return and the standard deviation of returns if over the past four...

What is the expected return and the standard deviation of returns if over the past four years an investment returned 10.0%, -12.0%, -14.0% and 12.0%?

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Answer 1

Answer #1

Year	length (x)	(x-mean)^2
1	10.00%	0.0121
2	-12.00%	0.0121
3	-14.00%	0.0169
4	12.00%	0.0169



Sum	-4.00%	0.058
	Average return	-1.00%
	variance	0.0145
	standard deviation	12.04%

Average return = sum of returns/number of returns(n)

Variance = sum ( x-mean)^2/n-1

standard deviation = sqrt(variance)

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Answer 2

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