What is the expected return and the standard deviation of returns if over the past four...
What is the expected return and the standard deviation of returns if over the past four years an investment returned 10.0%, -12.0%, -14.0% and 12.0%?
Homework Answers
| Year | length (x) | (x-mean)^2 |
| 1 | 10.00% | 0.0121 |
| 2 | -12.00% | 0.0121 |
| 3 | -14.00% | 0.0169 |
| 4 | 12.00% | 0.0169 |
| Sum | -4.00% | 0.058 |
| Average return | -1.00% | |
| variance | 0.0145 | |
| standard deviation | 12.04% |
Average return = sum of returns/number of returns(n)
Variance = sum ( x-mean)^2/n-1
standard deviation = sqrt(variance)
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