Question

ins, calculate the arithmetic average returns, the variances, and the standard deviations for Using LO 1 7. Calculating Returns and Variability X and Y. Returns Year х Y 1 2 3 4 5 14% -13 11 18 8 41% 9 23 -13 42

Answer 1

Return X:

Arithmetic Return = [0.14 + (-0.13) + 0.11 + 0.18 + 0.08] / 5
Arithmetic Return = 0.38 / 5
Arithmetic Return = 0.0760 or 7.60%

Variance = [(0.14 - 0.076)^2 + (-0.13 - 0.076)^2 + (0.11 - 0.076)^2 + (0.18 - 0.076)^2 + (0.08 - 0.076)^2] / 4
Variance = 0.05852 / 4
Variance = 0.01463

Standard Deviation = (0.01463)^(1/2)
Standard Deviation = 0.1210 or 12.10%

Return Y:

Arithmetic Return = [0.41 + (-0.09) + 0.23 + (-0.13) + 0.42] / 5
Arithmetic Return = 0.84 / 5
Arithmetic Return = 0.1680 or 16.80%

Variance = [(0.41 - 0.168)^2 + (-0.09 - 0.168)^2 + (0.23 - 0.168)^2 + (-0.13 - 0.168)^2 + (0.42 - 0.168)^2] / 4
Variance = 0.28128 / 4
Variance = 0.07032

Standard Deviation = (0.07032)^(1/2)
Standard Deviation = 0.2652 or 26.52%