Yankee Transport Inc. earned the following total returns over the last 10 years: 1%, -6%, -2%, 8%,8%, 7%, 10%, 11%, 9%, and 12%. The 10-year average return and standard deviation for Yankee is
A) 5.93% and 6.31%, respectively.
B) 5.80% and 6.03%, respectively.
C) 4.81% and 5.83%, respectively.
D) 5.89% and 7.03%, respectively.

Question

Quizplus · Accepted Answer

To calculate the 10-year average return, we add up all the returns and divide by 10:
(1% - 6% - 2% + 8% + 8% + 7% + 10% + 11% + 9% + 12%) / 10 = 5.8%
To calculate the standard deviation, we first find the variance by calculating the squared differences between each return and the average return, summing these squared differences, and dividing by 10:
[ (1% - 5.8%)^2 + (-6% - 5.8%)^2 + ... + (12% - 5.8%)^2 ] / 10 = 37.33%
Then, we take the square root of the variance to obtain the standard deviation:
√37.33% = 6.03%
Therefore, the answer is B.