Question

Q6) A stock had the following annual returns: 5.10% , 20.17% , -24.68% , and 26.60%. Compute the following for the stock:

a) Expected Return :

b) Variance :  

c) Standard Deviation :

Answer 1

Part A:

Expected Ret = Sum [ ret ] / n

= [ 5.10% + 20.17% -24.68% +26.60% ] / 4

= 27.19% / 4

= 6.80%

Part B:

Variance:

Sum [ (X - Avg X)^2 ] / n

Particulars	X	X - Avg X	(X - Avg X)^2
1	0.0510	-0.0170	0.0003
2	0.2017	0.1337	0.0179
3	-0.2468	-0.3148	0.0991
4	0.2660	0.1980	0.0392
Sum [ (X-Avg X)^2]			0.1565
n			4
Variance = Sum [ (X-Avg X)^2] / n			0.0391

Part C:

SD = SQRT [ Variance ]

Particulars	X	X - Avg X	(X - Avg X)^2
1	0.0510	-0.0170	0.0003
2	0.2017	0.1337	0.0179
3	-0.2468	-0.3148	0.0991
4	0.2660	0.1980	0.0392
Sum [ (X-Avg X)^2]			0.1565
n			4
Variance = Sum [ (X-Avg X)^2] / n			0.0391
SD = SQRT [ Variance ]			0.1978