Computation of the Standard Deviation of Rates of Return
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Calculate the standard deviation of the following rates of return
Year Return
1 7%
2 25
3 14
4 -15
5 16
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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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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 - ...
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