Standard Deviation The past five monthly returns for K and Company are 4.25 percent, 4.13 percent, -2.05 percent, 3.25 percent, and 7.75 percent. What is the standard deviation of these returns?
A) 1.40%
B) 3.37%
C) 3.53%
D) 0.12%

Question

Quizplus · Accepted Answer

Using the formula for sample standard deviation, we get:

s = sqrt[(1/(n-1))*((x1-xbar)^2+(x2-xbar)^2+...+(xn-xbar)^2)]

where n is the sample size, xi is the ith observation, and xbar is the sample mean.

Plugging in the values, we get:

s = sqrt[(1/4)*((0.0425-0.0057)^2+(0.0413-0.0057)^2+(-0.0205-0.0057)^2+(0.0325-0.0057)^2+(0.0775-0.0057)^2)]

s = 0.0353 or 3.53%

Therefore, the best choice is C.

Standard Deviation the Past Five Monthly Returns for K and Company