Problem 12-7 Calculating Returns and Variability [LO1] Returns Year X Y 1 14 % 1
ID: 2745179 • Letter: P
Question
Problem 12-7 Calculating Returns and Variability [LO1]
Returns
Year
X
Y
1
14
%
18
%
2
28
29
3
9
10
4
–
21
–
26
5
10
20
Using the returns shown above, calculate the arithmetic average returns, the variances, and the standard deviations for X and Y. (Do not round intermediate calculations. Enter your average return and standard deviation as a percent rounded to 2 decimal places, e.g., 32.16, and round the variance to 5 decimal places, e.g., 32.16161.)
X
Y
Average return
8 %
10.2 %
Variance
Standard deviation
%
%
Returns
Year
X
Y
1
14
%
18
%
2
28
29
3
9
10
4
–
21
–
26
5
10
20
Explanation / Answer
Arthimentoc Average = mean of returns
(14+ 28+9 -21+10)/5 = 8%
Simililrily for B = it would be 12%
Variance =(14-8)^2 + (28 -8)^2 + (9 -8)^2 + (-21- 8)^2 + (10-8)^2/5
= 320.5
Similarlily for stock b = 455.2
Standard Deviation for A = 17.9
Standard Deviation for B = 21.335