Calculate the average returns, the variances, and the standard deviations for X and Y using the returns in the table

Finance Dec 19, 2020

Calculate the average returns, the variances, and the standard deviations for X and Y using the returns in the table.

YearXY111%23%215%26%3−13%−14%410%11%510%16%

Expert Solution

For asset X:

average return = (11%+15%+(−13%)+10%+10%)/5=6.6%.(11%+15%+(−13%)+10%+10%)/5=6.6%.

variance = ((11%−6.6%)2+(15%−6.6%)2+(−13%−6.6%)2+(10%−6.6%)2+(10%−6.6%)2)/(5−1)=1.24%((11%−6.6%)2+(15%−6.6%)2+(−13%−6.6%)2+(10%−6.6%)2+(10%−6.6%)2)/(5−1)=1.24%

standard deviation = √1.24%=11.15%1.24%=11.15%

For asset Y:

average return = (23%+26%+(−14%)+11%+16%)/5=12.4%.(23%+26%+(−14%)+11%+16%)/5=12.4%.

variance = ((23%−12.4%)2+(26%−12.4%)2+(−14%−12.4%)2+(11%−12.4%)2+(16%−12.4%)2)/(5−1)=2.52%((23%−12.4%)2+(26%−12.4%)2+(−14%−12.4%)2+(11%−12.4%)2+(16%−12.4%)2)/(5−1)=2.52%

standard deviation = √2.52%=15.88%

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