Question

The table below shows annual returns for stocks of companies X and Y. Calculate the arithmetic average returns. In addition, calculate their variances, as well as their standard deviations.

  

	Returns
Year	X	Y
1	15 %	24 %
2	33	45
3	22	-8
4	-23	-22
5	24	53

   

Requirement 1:
(a)	The arithmetic average return of company X's stock is:
	(Click to select)   14.20%   17.32%   11.50%   17.75%   16.05%

   

(b)	The arithmetic average return of company Y's stock is:
	(Click to select)   23.00%   18.40%   14.90%   22.45%   20.79%

  

Requirement 2:
(a)	The variance of company X's stock returns is: (Do not round intermediate calculations.)
	(Click to select)   0.047427   0.059213   0.038370   0.059283   0.047370

   

(b)	The variance of company Y's stock returns is: (Do not round intermediate calculations.)
	(Click to select)   0.133287   0.086370   0.106630   0.126633   0.101306

  

Requirement 3:
(a)	The standard deviation of company X's stock returns is: (Do not round intermediate calculations.)
	(Click to select)   21.76%   17.63%   21.68%   27.21%   24.35%

   

(b)	The standard deviation of company Y's stock returns is: (Do not round intermediate calculations.)
	(Click to select)   32.65%   40.82%   26.45%   31.83%   35.59%

Answer 1

returns deviation^2 deviation^2 year X 15.0% 33.0% 22.0% -23.0% 24.0% 14.20% 24.0% 45.0% -8.0% -22.0% 53.0% 18.40% deviation (returns-average) 0.80% 18.80% 7.80% -37.20% 9.80% variance = 0.0064% 3.5344% 0.6084% 13.8384% 0.9604% 0.04737 deviation (returns-average) 5.60% 26.60% -26.40% -40.40% 34.60% variance = 0.3136% 7.0756% 6.9696% 16.3216% 11.9716% 0.10663 average return standard deviation = variance ^0.5 21.76% standard deviation = 32.65% Arithmetic average Variance Standard deviation 14.20% 0.04737 21.76% 18.40% 0.10663 32.65%