In: Accounting
Given the following table, calculate the standard deviation of returns for Vegeta Incorporated. Select the range that includes the correct answer.
The option (1) is the right option.
Explanation:
Year | return | return-average return | square of (return-average return) | |
2017 | 10% | 6.25% | 0.39062500% | |
2018 | 25% | 21.25% | 4.51562500% | |
2019 | -15% | -18.75% | 3.51562500% | |
2020 | -5% | -8.75% | 0.76562500% | |
average return = (10+25-15-5)/4 | 3.75% | |||
sum of (square of (return-average return) | 9.19% | |||
variance = sum of (square of (return-average return) | 9.19%/4 | 0.022975 | ||
standard deviation = square root of variance | 15.16% | |||
Option is (1) | standard deviation is less than or equal to 16% |
The correct answer is (1).