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%

a. Compare the means of these two population distributions

b. Compare the standard deviations of these two population distributions.

Solution

Mean of common stocks:

(4+14.3+19-14.7-26.5+37.2+23.8)/7 = 8.15

Standard Deviation = Under root of Summation of sqaure of deviation from mean divded by Number if items

From each item deduct mean

Do the square of what you get

Then use formula

Under root of Summation of sqaure of deviation from mean divded by Number if items

Population Standard Deviation :20.708

Standard deviation of these two population distributions:

Population Standard Deviation :1.196

Mean : 5.7833

5.7