Portfolio's Annual Total Returns Analysis
What are the median and standard deviation of a portfolio's annual total returns for a five-year period?
The portfolio's annual total returns (in percent) for a five-year period are: -7.09, 1.59, 2.73, -2.48, 9.30. The median and the standard deviation for this sample are the closest to:
A. 0.72 and 5.47
B. 1.59 and 5.47
C. 2.47 and 6.12
D. 1.59 and 6.12
Analysis of Median and Standard Deviation
The median and the standard deviation for the given sample of annual total returns are closest to:
Median: 1.59
Standard Deviation: 5.47
Therefore, the correct option is "1.59 and 5.47."
The median is a measure of central tendency that represents the middle value in a dataset. In this case, the median annual total return is 1.59%. It is calculated by arranging the returns in ascending order and finding the value that lies in the middle.
The standard deviation is a measure of dispersion that quantifies the spread of the data points around the mean. For this sample, the standard deviation of the annual total returns is 5.47%. It indicates the average amount by which each return deviates from the mean return.
These measures provide insights into the central tendency and variability of the portfolio's annual total returns. The median helps identify the midpoint of the returns, while the standard deviation gives an indication of the level of volatility or risk associated with the returns.