P129 Calculating Returns and Variability LO Youve observed t

P12-9 Calculating Returns and Variability [LO You\'ve observed the following returns on Crash-n-Burn Computer\'s stock over the past five years: 4 percent, -9 percent, 30 percent, 21 percent, and 14 percent. Requirement 1: What was the average return on Crash-n-Burn\'s stock over this five year period? (Click to select) ? Requirement 2: (a) What was the variance of Crash-n-Burn\'s returns over this period? (Do not round intermediate calculations.) (Click to select) v (b) What was the standard deviation of Crash-n-Burn\'s returns over this period? (Do not round intermediate calculations.) (Click to select)

Solution

Average return=Total of returns/Total time period

=(4-9+30+21+14)/5=12%

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

=[914/(5-1)]^(1/2)

(914/4)^(1/2)

which is equal to

=15.12%(Approx).

Variance=Standard deviation^2

=228.5%

Return	(Return-Mean)^2
4	(4-12)^2=64
-9	(-9-12)^2=441
30	(30-12)^2=324
21	(21-12)^2=81
14	(14-12)^2=4
	Total=914%