Question

In: Finance

Returns for the Alcoff Company over the last 3 years are shown below. What's the standard...

Returns for the Alcoff Company over the last 3 years are shown below. What's the standard deviation of the firm's returns? (Hint: This is a sample, not a complete population, so the sample standard deviation formula should be used.)

Year	Return
2010	21.00%
2009	−12.50%
2008	26.00%

Select the correct answer.

a. 20.87%

b. 20.93%

c. 20.89%

d. 20.91%

e. 20.95%

Expert Solution

standard deviation =

X = Yearly return

X' = average return

N = number of periods

Average return = (26% - 12.50% + 21%) / 3 = 11.50%

Standard deviation = [(26% - 11.50%)^2 + (-12.50% - 11.50%)^2 + (21% - 11.50%)^2 / (3 - 1) ]^(1/2)

= 20.93%

Option b is correct

jeff jeffy answered 2 years ago

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