Van Horne Pharmaceutical\'s annual stock returns over the previous five years ar
ID: 2784507 • Letter: V
Question
Van Horne Pharmaceutical's annual stock returns over the previous five years are shown below.
Year Stock Return
1 11.8%
2 -81.7%
3 24%
4 39.8%
5 59%
An analyst wants to publish a forecast of next years stock return and is using this data to guide that guess. What is your best guess for the return in an average, or typical, year?
10.82%
10.9%
11.3%
10.74%
10.58%
On average, how much has an investment earned per year in Van Horne's stock? In other words, what is the average compound return for Van Horne's stock?
-10.82%
-5.73%
-13.92%
-11.81%
-9.43%
If an investor put $500 into Van Horne's stock at time period 0, how much would that investment be worth at the end of these five years?
$334.81
$281.96
$228.74
$274.38
$259.20
What is the standard deviation of Van Horne's annual returns over this five-year period?
52.79%
53.53%
54.53%
54.28%
54.03%
Explanation / Answer
The best guess as to the next years return using the given data can be calculated as an average of all the past year's return.
The Average will be the simple mean of all the past year's returns and will be given as:
= (11.80+(-81.70)+24+39.80+59)/5,or
=52.90%/5
10.58%
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