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11.2-28 Question Help Treasury bill returns are 7%, 6%, 5%, and 8% over four years. The standard deviation of returns of Trea

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Answer #1

Average return=Total return/Total time period

=(7+6+5+8)/4=6.5%

Return (Return-Average Return)^2
7 (7-6.5)^2=0.25
6 (6-6.5)^2=0.25
5 (5-6.5)^2=2.25
8 (8-6.5)^2=2.25
Total=5%

Standard deviation=[Total (Return-Average Return)^2/(Time period-1)]^(1/2)

=[5/(4-1)]^(1/2)

=[5/3]^(1/2)

=1.29%(Approx).

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