Question

solve question 5&6

5. Calculating Average Returns The rate of return on Cherry Jalopies, Inc., stock over the last five years was 7 percent, 21 percent, - 8 percent, - 5 percent, and 31 percent. Over the same period, the return on Straw Construction Company's stock was 12 percent, 34 percent, - 11 percent, -7 percent, and 41 percent. What was the arithmetic average return on each stock over this period? 6. Calculating Returns and Variability Using the following returns, calculate the arithmetic average returns, the variances, and the standard deviations for stocks A and B. Year 1 А 17% 9 B 21% 7 -10 2 3 -14 4 24 26 5 13 15

Answer 1

ECA-A) ² Standard dwiation of stock A. 830.8 12.89 % 5 2. Standard deviation stock B 9 {(B-B) ² - 12.61% 794.8 5 166.161 1 830.8 5 Variance of stock A ELA-A) 2 ECB - B) 2 = 794.8= stock B 158.96 % variance of

3) Average rate of return of Cherry Jalopies Inc over last syears sum og returns of different years No of years 7+21+ (-8) + (-5)+31 46 = 9.2% 5 5 rate Average of wturn of Straw construction Company's stock 12 +34 + (-11) + (-7)+41 - 69 13.8% 5 5 5 A (%) B67.) (B-B) ² (A-A? Year lo 21 51.84 84.64 17 0.64 23.04 9 7 475.24 566.44 HN Jn 3 -14 201.64 24 26 201.64 10.24 10.24 15 13 830.8 794.8 Arithmetic ang return of A 17+9+(-14)+24 +13 5 5 49/5 9.8% Arithmetic average return of 8 - 21+7+(-10)+26 +1S 595 = 11,8% 5