# Computation of the Standard Deviation of Rates of Return

Calculate the standard deviation of the following rates of return

Year Return

1 7%

2 25

3 14

4 -15

5 16

How do I do this problem

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#### Solution Preview

Steps in solving the problem:

1. Solve for the mean of the rates of return for 5 years.

mean = rates of return / n

Mean= [7+25+14+(-15)+16]/5

Mean= 9.4

Year Return (%) Mean

1 7 9.4

2 25 9.4

3 14 9.4

4 -15 9.4

5 16 9.4

Average = 9.4

2. Solve for the deviation.

deviation = x - ...

#### Solution Summary

This is a step-by-step method in computing the standard deviation given a set of rates of return.

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