A stock had returns of 6 percent, 27 percent, and -21 percent over the past thre

Question

A stock had returns of 6 percent, 27 percent, and -21 percent over the past three years. What was the standard deviation of the stock’s returns? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.

A stock had returns of 6 percent, 27 percent, and -21 percent over the past three years. What was the standard deviation of the stock’s returns? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.

Explanation / Answer

Solution:

Variance = Total Sum / number of returns

= 1158/3 = 386

Hence Standard deviation = SQRT ( variance )

Therefore Standard deviation = 19.64

Thank you.

Sl.No                     Returns                      Difference                       Square 1 6 2 4 2 27 23 529 3 -21 -25 625 Average 4 Total sum 1158

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