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The last four years of returns for a stock are as shown here: a
The last four years of returns for a stock are as shown here: a. What is the average annual return? b. What is the variance of the stock's returns? c. What is the standard deviation of the stock's returns? Note: Notice that the average return and standard deviation must be entered in percentage format. The variance must be entered in decimal format. a. What is the average annual return? The average return is %. (Round to two decimal places.) b. What is the variance of the stock's returns? The variance of the returns is (Round to five decimal places.) c. What is the standard deviation of the stock's returns? The standard deviation is % (Round to two decimal places.)
Expert Solution
Answer a.
Average Return = [(-0.0350) + 0.2790 + 0.1240 + 0.0390] / 4
Average Return = 0.4070 / 4
Average Return = 0.1018 or 10.18%
Answer b.
Variance = [(-0.0350 - 0.1018)^2 + (0.2790 - 0.1018)^2 + (0.1240 - 0.1018)^2 + (0.0390 - 0.1018)^2] / 3
Variance = 0.054551 / 3
Variance = 0.01818
Answer c.
Standard Deviation = (0.01818)^(1/2)
Standard Deviation = 0.1348 or 13.48%
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