Question
In: Finance
Obtuse Ltd has recorded the following end-of-year share prices and paid dividends: Year Price Dividend 2010...
Obtuse Ltd has recorded the following end-of-year share prices and paid dividends: Year Price Dividend 2010 $1.20 $0.00 2011 $1.35 $0.05 2012 $1.12 $0.00 2013 $1.47 $0.00 2014 $1.71 $0.05 2015 $1.69 $0.00 2016 $1.82 $0.06 2017 $1.87 $0.10 Calculate the yearly returns for this share. Calculate the standard deviation of returns for the company's shares. This question has been answered but I want to know how he arrived at the result of standard deviation (15.58%). Thanks
Solutions
Expert Solution
| Year | Price | Dividend | Change in price i.e. capital gain (This year price - last year price)= | Total Return = Capital gain + dividend | Return(%) = Total Return/Last year price | x - Mean | (x-Mean)^2 | |||
| (x) | ||||||||||
| 2010 | 1.2 | 0 | 0 | 0 | 0.0000 | -0.0748 | 0.0056 | |||
| 2011 | 1.35 | 0.05 | 0.15 | 0.2 | 0.1481 | 0.0734 | 0.0054 | |||
| 2012 | 1.12 | 0 | -0.23 | -0.23 | -0.2054 | -0.2801 | 0.0785 | |||
| 2013 | 1.47 | 0 | 0.35 | 0.35 | 0.2381 | 0.1633 | 0.0267 | |||
| 2014 | 1.71 | 0.05 | 0.24 | 0.29 | 0.1696 | 0.0948 | 0.0090 | |||
| 2015 | 1.69 | 0 | -0.02 | -0.02 | -0.0118 | -0.0866 | 0.0075 | |||
| 2016 | 1.82 | 0.06 | 0.13 | 0.19 | 0.1044 | 0.0296 | 0.0009 | |||
| 2017 | 1.87 | 0.1 | 0.05 | 0.15 | 0.0802 | 0.0055 | 0.0000 | |||
| 0.523252 | 0.13352 | |||||||||
| Mean Return = | Sum x / (n-1) = | 0.523252/(8-1) | ||||||||
| 0.07475 | ||||||||||
| SD = | Sq. Root of (Sum (x-Mean)^2/(n-1)) | |||||||||
| SD = | Sq. Root of (0.13352/(8-1)) | |||||||||
| SD = | Sq. Root of (0.019074) | |||||||||
| SD = | 0.138108 | |||||||||
| SD = | 13.8108% | |||||||||
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