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the rate of return on cherry jalopies inc
the rate of return on cherry jalopies inc. stock over the last five years were 25 percent, 11 percent, -7 percent, 6, and 11 percent. Over the same period, the returns on Straw Construction Company's stock were 16 percent, 22 percent, -4 percent, 4 percent, and 14 percent.
Calculate the variances and standard deviations for each
Variance:
Standard deviation:
Expert Solution
Computation of Variancea and Standard Deviation for Cherry Jalopies, Inc.:
Average Return = [0.25 + 0.11 + (-0.07) + 0.06 + 0.11] / 5
Average Return = 0.46 / 5
Average Return = 0.092 or 9.20%
Variance = [(0.25 - 0.092)^2 + (0.11 - 0.092)^2 + (-0.07 - 0.092)^2 + (0.06 - 0.092)^2 + (0.11 - 0.092)^2] / 4
Variance = 0.05288 / 4
Variance = 0.01322
Standard Deviation = (0.01322)^(1/2)
Standard Deviation = 11.50%
Computation of Variancea and Standard Deviation for Straw Construction Company:
Average Return = [0.16 + 0.22 + (-0.04) + 0.04 + 0.14] / 5
Average Return = 0.52 / 5
Average Return = 0.104 or 10.40%
Variance = [(0.16 - 0.104)^2 + (0.22 - 0.104)^2 + (-0.04 - 0.104)^2 + (0.04 - 0.104)^2 + (0.14 - 0.104)^2] / 4
Variance = 0.04272 / 4
Variance = 0.01068
Standard Deviation = (0.01068)^(1/2)
Standard Deviation = 0.1033 or 10.33%
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