1. You have been following a stock for 3 months and the following is its past re
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Question
1.
You have been following a stock for 3 months and the following is its past return
Year 1: 8%
Year 2: 16%
Year 3: 7%
What is the standard deviation of the stock based on the historical data? (Put the answer in decimal points instead of percentage)
2.
The returns of a mutual fund manager for the past 3 years are the following:
Year 1: 5%
Year 2: 12%
Year 3: -2%
What is the geometric average return of the fund for the past three years? Put return in decimal points instead of percentage.
3. Your investment has a 30% chance of earning a 11% rate of return, a 40% chance of earning a 11% rate of return and a 30% chance of earning -7%. What is the standard deviation on this investment? (Put your answers in decimal points instead of percentage)
Explanation / Answer
1.
Standard Deviation = square root of 48.68/3 = 4.028
2. Geometric Average return = {(1.05 x 1.12 X 0.98)1/3 - 1 = 0.048
3.
Standard deviation = Square root 48.02 /2 = 4.90
Year Rate of return (A) Average rate (B) (A-B)2 1 8 10.33 5.44 2 16 10.33 32.15 3 7 10.33 11.09 Total 31 31 48.68Related Questions
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