Question

The rate of return on Cherry Jalopies, Inc., stock over the last five years was 20 percent, 11 percent, -2 percent, 4 percent, and 10 percent. Over the same period, the return on Straw Construction Company’s stock was 16 percent, 21 percent, -3 percent, 4 percent, and 19 percent.

Calculate the variances and the standard deviations for Cherry and Straw. (Enter variance as a decimal and standard deviation as a percent. Round your variance to 5 decimal places and standard deviation to 2 decimal places. Omit the "%" sign in your response.)

	Cherry		Straw
Variance
Standard deviation		%		%

Answer 1

			Cherry		Straw
Variance			0.00542		0.00866
Standard Deviation			7.36%		9.31%
Working:
# 1	Calculation of average return:
			Return
	Year		Cherry		Straw
	1		0.2000		0.1600
	2		0.1100		0.2100
	3		-0.0200		-0.0300
	4		0.0400		0.0400
	5		0.1000		0.1900
	Total (a)		0.4300		0.5700
	Average Return (b=a/5)		0.0860		0.1140
# 2	Calculation of Variance:
	Cherry:
			Return	Average Return
	Year		a	b	c=(a-b)^2
	1		0.2000	0.0860	0.01300
	2		0.1100	0.0860	0.00058
	3		-0.0200	0.0860	0.01124
	4		0.0400	0.0860	0.00212
	5		0.1000	0.0860	0.00020
	Total (a)				0.02712
	Variance (b=a/5)				0.00542
	Straw:
			Return	Average Return
	Year		a	b	c=(a-b)^2
	1		0.1600	0.1140	0.00212
	2		0.2100	0.1140	0.00922
	3		-0.0300	0.1140	0.02074
	4		0.0400	0.1140	0.00548
	5		0.1900	0.1140	0.00578
	Total (a)				0.04332
	Variance (b=a/5)				0.00866
# 3	Calculation of standard deviation:
	Standard deviation		=	Variance ^ (1/2)
	Standard deviation of:
	Cherry		=	Variance ^ (1/2)
			=	0.00542	^ (1/2)
			=	7.36%
	Straw		=	Variance ^ (1/2)
			=	0.00866	^ (1/2)
			=	9.31%