Question

You’ve observed the following returns on Bennington Corporation’s stock over the past five years: 17 percent, −4 percent, 20 percent, 12 percent, and 10 percent.

a. What was the arithmetic average return on the company's stock over this five-year period? (Do not round intermediate calculations and enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.)

b-1. What was the variance of the company's stock returns over this period? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .32161.)

b-2. What was the standard deviation of the company's stock returns over this period? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Answer 1

Average return=Total return/Total time period

=(17-4+20+12+10)/5

=11%

Return	(Return-Average Return)^2
17	(17-11)^2=36
-4	(-4-11)^2=225
20	(20-11)^2=81
112	(12-11)^2=1
10	(10-11)^2=1
	Total=344%

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

=[344/(5-1)]^(1/2)

=[344/4]^(1/2)

=9.27%(Approx)

Variance=Standard deviation^2

=0.0086