Problem 10-9 Calculating Returns and Variability You’ve observed the following r

Question

Problem 10-9 Calculating Returns and Variability You’ve observed the following returns on Yasmin Corporation’s stock over the past five years: 12 percent, –12 percent, 19 percent, 24 percent, and 10 percent. a. What was the arithmetic average return on the company'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 the company's stock 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 the company's stock 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

1.Average return=Total of returns/Total time period

=(12-12+19+24+10)/5=10.6%

SD=[Total of (return-mean)^2/(time period-1)]^(1/2)

=13.81%(Approx)

Variance=SD^2

=0.01908

Return (return-mean)^2 12 (12-10.6)^2=1.96 -12 (-12-10.6)^2=510.76 19 (19-10.6)^2=70.56 24 (24-10.6)^2=179.56 10 (10-10.6)^2=0.36 Total=763.2%

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