1. A firm you are analyzing has had the following returns the past 5 years: 7.0%

Question

1. A firm you are analyzing has had the following returns the past 5 years: 7.0%, 6.0%, -4.0%, 3.0% and 2.0 %. What are the standard deviation and variance of the past five year returns?

2. A stock has had returns of 5.05%, 12.11%, 5.83%, 6.14%, and -13.19% over the past five years. What was the holding period return for the stock?

3. You are constructing a two stock portfolio based on the information provided below. What dollar amount will you invest in each stock to achieve the desired return goal?

Goal Return of Portfolio: 10.00%

Dollar Amount to Invest: $20,000

Explanation / Answer

1. A firm you are analyzing has had the following returns the past 5 years: 7.0%, 6.0%, -4.0%, 3.0% and 2.0 %. What are the standard deviation and variance of the past five year returns?

Average Return = (7.0%+ 6.0%-4.0%+3.0%+2.0 %)/5

Average Return = 2.80%

Variance =( ( (7.0%-2.8%)^2+ (6.0%-2.8%)^2+ (-4.0%-2.8%)^2+(3.0%-2.8%)^2+(2.0%-2.8%)^2)/(5-1))

Variance = 0.00187

Variance = 18.7 % 2

Standard Deviation = Variance^(1/2)

Standard Deviation = 0.00187^(1/2)

Standard Deviation = 4.32%

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.