Stock W has the following returns for various states of the economy: Stock W's standard deviation of returns is
A)10%.
B)14%.
C)17%.
D)20%

Question

Stock W has the following returns for various states of the economy:  Stock W's standard deviation of returns is
A)10%. 
B)14%. 
C)17%. 
D)20%

Quizplus · Accepted Answer

To calculate the standard deviation, we need to find the average return and deviation of the returns from the mean. However, we are not given the mean return. Therefore, we need to use the range between the highest and lowest returns to estimate the standard deviation.

In this case, the range is 17% (11% - (-6%) = 17%). Since we do not know the number of returns or the shape of the distribution, we assume a normal distribution and use the empirical rule, which states that for a normal distribution, about 68% of the data falls within one standard deviation of the mean.

Using this rule, we can estimate that the standard deviation of Stock W's returns is about 17%. Therefore, the correct answer is C) 17%.

Stock W Has the Following Returns for Various States of the Economy