Question

1. ) Suppose a stock had an initial price of $37 per share, paid a dividend of $0.3 per share during the year, and had an ending share price of $50. Compute the percentage total return. Enter the answer in 4 decimals.

2. ) Calculate the arithmetic average of the following returns.

Year Return

1 0.18

2 0.08

3   0.11

4   -0.05

5 0.3

Enter the answer with 4 decimals.

3.) Calculate the standard deviation of the following returns.

Year Return

1 -0.18

2 -0.06

3   -0.09

4   0.21

5 0.08

Enter the answer with 4 decimals.

4. ) Calculate the variance of the following returns.

Year Return

1 -0.16

2 0.08

3   -0.08

4   0.14

5 -0.02

Enter the answer with 4 decimals.

Answer 1

Answer to Question 1:

Percentage Return = (Ending Price + Dividend - Initial Price) / Initial Price
Percentage Return = ($50.00 + $0.30 - $37.00) / $37.00
Percentage Return = $13.30 / $37.00
Percentage Return = 0.3595

Answer to Question 2:

Arithmetic Average = [0.18 + 0.08 + 0.11 + (-0.05) + 0.30] / 5
Arithmetic Average = 0.62 / 5
Arithmetic Average = 0.1240

Answer to Question 3:

Arithmetic Average = [(-0.18) + (-0.06) + (-0.09) + 0.21 + 0.08] / 5
Arithmetic Average = -0.04 / 5
Arithmetic Average = -0.008

Variance = [(-0.18 - 0.008)^2 + (-0.06 - 0.008)^2 + (-0.09 - 0.008)^2 + (0.21 - 0.008)^2 + (0.08 - 0.008)^2] / 4
Variance = 0.09556 / 4
Variance = 0.02389

Standard Deviation = (0.02389)^(1/2)
Standard Deviation = 0.1546

Answer to Question 4:

Arithmetic Average = [(-0.16) + 0.08 + (-0.08) + 0.14 + (-0.02)] / 5
Arithmetic Average = -0.04 / 5
Arithmetic Average = -0.008

Variance = [(-0.16 - 0.008)^2 + (0.08 - 0.008)^2 + (-0.08 - 0.008)^2 + (0.14 - 0.008)^2 + (-0.02 - 0.008)^2] / 4
Variance = 0.05936 / 4
Variance = 0.0148