The standard deviation of the 10 annual returns from 2005 through 2014 for the S&P 500 can be calculated as shown in Table 6‐5.

Table 6‐5

Transcribed Image Text:

TABLE 6-5 Calculating the Standard Deviation for the Period 2005-2014 R (%) (R-R)² Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 4.83 15.61 5.48 -36.55 25.94 14.82 2.10 15.89 32.05 13.52 R = 9.37 R-R -4.54 6.24 -3.89 -45.92 16.57 5.45 -7.27 6.52 22.68 4.15 20.61 38.94 15.13 2108.65 274.56 29.70 52.85 42.51 514.38 17.22 (R-R)² = 3114.56 0² Σ(R 3114.56 9 : 346.06 σ= = (346.06)/2 =18.60%