You’ve observed the following returns on Crash-n-Burn Computer’s stock over the
ID: 2762178 • Letter: Y
Question
You’ve observed the following returns on Crash-n-Burn Computer’s stock over the past five years: 14 percent, –14 percent, 16 percent, 26 percent, and 10 percent. a. What was the arithmetic average return on Crash-n-Burn’s stock over this five-year period? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.) Average return % b-1 What was the variance of Crash-n-Burn’s returns over this period? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., 32.16161.) Variance b-2 What was the standard deviation of Crash-n-Burn’s returns over this period? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Standard deviation %
Explanation / Answer
Solution:
Year
Given Returns (%)
Deviation2
(Average Return - Given Return)2
1
14
(10.40 - 14)2 = 12.96
2
-14
[(10.40 - (-14)]2 = 595.36
3
16
(10.40 - 16) 2 = 31.36
4
26
(10.40 - 26)2 = 243.36
5
10
(10.40 - 10)2 = 0.16
52
883.20
a) Average Return = Sum of Given Return / No. of years = 52 / 5 = 10.4%
b-1) Variance = Sum of (Average Return - Given Return)2 / n = 883.20 / 5 = 176.64
b-2) Standard Deviation = (Variance)1/2 = (176.64)1/2 = 13.29
Year
Given Returns (%)
Deviation2
(Average Return - Given Return)2
1
14
(10.40 - 14)2 = 12.96
2
-14
[(10.40 - (-14)]2 = 595.36
3
16
(10.40 - 16) 2 = 31.36
4
26
(10.40 - 26)2 = 243.36
5
10
(10.40 - 10)2 = 0.16
52
883.20
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.