Consider the following realized annual returns: Year End Market Realized Return
ID: 2742638 • Letter: C
Question
Consider the following realized annual returns:
Year End
Market Realized Return
Microsoft Realized Return
1996
21.2%
88.3%
1997
30.3%
56.4%
1998
22.3%
114.6%
1999
25.3%
68.4%
2000
-11.0%
-62.8%
2001
-11.3%
52.7%
2002
-20.8%
-22.0%
2003
33.1%
6.9%
2004
13.0%
9.2%
2005
7.3%
-0.9%
Required: Using the data provided in the table, calculate the average annual return, the variance of the annual returns, and the standard deviation of the average returns for the market from 1996 to 2005.
Year End
Market Realized Return
Microsoft Realized Return
1996
21.2%
88.3%
1997
30.3%
56.4%
1998
22.3%
114.6%
1999
25.3%
68.4%
2000
-11.0%
-62.8%
2001
-11.3%
52.7%
2002
-20.8%
-22.0%
2003
33.1%
6.9%
2004
13.0%
9.2%
2005
7.3%
-0.9%
Explanation / Answer
Please find the calculation as follows :
Year End Market Realized return Microsoft Realized return 1996 21.20% 88.30% 1997 30.30% 56.40% 1998 22.30% 114.60% 1999 25.30% 68.40% 2000 -11.00% -62.80% 2001 -11.30% 52.70% 2002 -20.80% -22.00% 2003 33.10% 6.90% 2004 13.00% 9.20% 2005 7.30% -0.90% Average Return 10.9% 31.1% Variance of the annual returns 3.7% 29.4% Standard Deviation 19.2% 54.2%