Question

Consider the following historical rates of return: Year Stock X returns

Consider the following historical rates of return:

                         Year   Stock X returns     

                        2014 -0.12   

                        2015                0.04            

                        2016               -0.01             

                        2017 0.05

                        2018               0.10

2019 0.08

a.  Find standard deviation of these returns.

b. Find coefficient of variation (CV).

Please show work how to find each!

Answer 1

Part a

Standard deviation is a measure of Total risk

Standard Deviation =

(Given Return - Average Return)2 numberofyears

Year	Return	(Return - Average Return)2
Y	X	(X - X')2
2014	-12	164.6944
2015	4	10.0278
2016	-1	3.3611
2017	5	17.3611
2018	1	0.0278
2019	8	51.3611
Total ( a )	5	246.8333

Average Return = Total Returns / number of years = 5 / 6 = 0.8333 %

Standard deviation =$\sqrt{\frac{246.8333}{6}}$

Standard deviation = 6.414

Part B

Coefficient of Variation (CV) is defined as "Risk per unit of return"

Coefficient of Variation (CV) = Standard Deviation $\div$ Average Return

= 6.414 $\div$ 0.8333

CV = 7.697

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