A stock has returns for five years of 14%, -16%, 12%, 23%, and 4%, respectively. The stock has an...

Question:

A stock has returns for five years of 14%, -16%, 12%, 23%, and 4%, respectively. The stock has an average return of what percent and a standard deviation of what percent?

7.40; 13.54

7.04; 14.63

7.40; 14.72

8.60; 14.63

8.60; 16.36

Standard Deviation of Returns:

The standard deviation of returns is an important measure of the risk of an investment. The higher the standard deviation of returns, the less desirable the investment is to a risk averse individual.

Answer and Explanation:

The expected return is:

{eq}\bar {r}=\frac{1}{n}\sum_{i=1}^{n}r_{i} {/eq}, where ri is the return in year i and n is the number of observations.

{e...

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Standard Deviation of Returns & Investment Volatility

from Finance 301: Corporate Finance

Chapter 8 / Lesson 6
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