What is the approximate standard deviation of returns if over the past four years an investment returned 8.0%, -12.0%, -12% and 15.0%?
A)9.26%
B)10.26%
C)11.26%
D)12.26% Mean =

Question

Quizplus · Accepted Answer

1. Calculate the mean of the returns: 
Mean = (8.0% - 12.0% - 12.0% + 15.0%) / 4 = -0.25%

2. Calculate the variance of the returns: 
Variance = [(8.0% - (-0.25%))^2 + (-12.0% - (-0.25%))^2 + (-12.0% - (-0.25%))^2 + (15.0% - (-0.25%))^2] / 4 
Variance = 1.3825%

3. Calculate the standard deviation of the returns: 
Standard deviation = √(variance) 
Standard deviation ≈ 10.26%

Therefore, the best choice is B, with an approximate standard deviation of 10.26%.

What Is the Approximate Standard Deviation of Returns If Over