The annual percentage returns on common stocks over a 7year

The annual percentage returns on common stocks over a 7-year period were as follows:

            4.0%    14.3% 19.0%   -14.7%   -26.5%   37.2%   23.8%

Over the same period the annual percentage returns on U.S. Treasury Bills were as follows:

            6.5%    4.4%    3.8%    6.9%    5.8%    5.1%    8.0%

Compare the means of these two population distributions

Compare the standard deviations of these two population distributions.

Solution

Mean of the annual percentage returns on common stocks over a 7-year period :-

= [ 4.0 + 14.3 + 19.0 + (-)14.7 + (-)26.5 + 37.2 + 23.8 ] / 7

= 57.1 / 7

= 8.16 % (approx)

Mean of the annual percentage returns on U.S. Treasury Bills over a 7-year period :-

= [ 6.5 + 4.4 + 3.8 + 6.9 + 5.8 + 5.1 + 8 ] / 7

= 40.5 / 7

= 5.79 % (approx)

Conclusion:- Mean (i.e., average) of the annual percentage returns on common stocks over a 7-year period is more than the mean of the annual percentage returns on U.S. Treasury Bills over a 7-year period.