Question

7. Calculating Returns and Variability (L01] Using the following returns, calculate the arithmetic average returns, the variances, and the standard deviations for X and Y Returns Year x hayo 15% 21% 226 3690 3 7 13 t riyel 4 -13 -26 de modo 15 a 11 en 15erala Inglotna 0 e

Answer 1

Average Return of X =(15%+26%+7%-13%+11%)/5 =9.20%
Average Return of Y =(21%+36%+13%-26%+15%)/5 =11.80%

Variance of X =((15%-9.20%)^2+(26%-9.20%)^2+(7%-9.20%)^2+(-13%-9.20%)^2+(11%-9.20%)^2)/(5-1))=2.0420% or 2.04%
Variance of Y =((21%-11.80%)^2+(36%-11.80%)^2+(13%-11.80%)^2+(-26%-11.80%)^2+(15%-11.80%)^2)/(5-1))=5.2770% or 5.28%

Standard Deviation of X =Variance of X^0.5 =2.0420%^0.5 =14.29%
Standard Deviation of Y =Variance of Y^0.5 =5.2770%^0.5 =22.97%