You’ve observed the following returns on Crash-n-Burn Computer’s stock over the past five years: 10 percent, –10 percent, 17 percent, 22 percent, and 10 percent. |
a. |
What was the arithmetic average return on Crash-n-Burn’s stock over this five-year period? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.) |
Average return | % |
b-1 |
What was the variance of Crash-n-Burn’s returns over this period? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., 32.16161.) |
Variance
b-2 |
What was the standard deviation of Crash-n-Burn’s returns over this period? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
Standard deviation | % |
Average return=Total return/Total time period
=(10-10+17+22+10)/5=9.8%
Return | (Return-Average return)^2 |
10 | (10-9.8)^2=0.04 |
-10 | (-10-9.8)^2=392.04 |
17 | (17-9.8)^2=51.84 |
22 | (22-9.8)^2=148.84 |
10 | (10-9.8)^2=0.04 |
Total=592.8% |
Standard deviation=[Total (Return-Average return)^2/(Time period-1)]^(1/2)
=[592.8/(5-1)]^(1/2)
=12.17%(Approx).
Variance=Standard deviation^2
=0.01482
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