Question

5. Award: 7.69 points Problem 12-9 Calculating Returns and Variability (L01) You've observed the following returns on Regina Computer's stock over the past five years: 12%, -9%, 20%, 17%, and 10%. a. What was the arithmetic average return on Regina's stock over this five-year period? (Round the final answer to 1 decimal place.) Average return % b-1. What was the variance of Regina's returns over this period? (Do not round intermediate calculations. Round the final answer to 5 decimal places.) Variance b-2. What was the standard deviation of Regina's returns over this period? (Do not round intermediate calculations. Round the final answer to 1 decimal place.) Standard deviation % References Worksheet Problem 12-9 Calculating Learning Objective: 12-01 How to calculate the return on an Returns and Variability (L01) investment.

Answer 1

Average return=Total return/Total time period

=(12-9+20+17+10)/5

=10%

Return	(Return-Average Return)^2
12	(12-10)^2=4
-9	(-9-10)^2=361
20	(20-10)^2=100
17	(17-10)^2=49
10	(10-10)^2=0
	Total=514%

Standard deviation=[Total (Return-Average Return)^2/(Time period-1)]^(1/2)

=[514/(5-1)]^(1/2)

=[514/4]^(1/2)

=11.3%(Approx)

Variance=Standard deviation^2

=0.01285