Find the standard deviation for a security that has three one-year returns of 5%,10%,and 15%.
A)8.33%
B)16.67%
C)5.00%
D)25.00%

Question

Quizplus · Accepted Answer

To find the standard deviation, first calculate the mean return: (5% + 10% + 15%) / 3 = 10%. Then, find the squared deviations from the mean: (5%-10%)^2 = 25, (10%-10%)^2 = 0, (15%-10%)^2 = 25. The average of these squared deviations is (25 + 0 + 25) / 3 = 16.67. The standard deviation is the square root of this average: √16.67 ≈ 4.08%, which is closest to 5.00%.

Find the Standard Deviation for a Security That Has Three