FIN2601 ASSIGNMENT 2 2024

To find the average return, we add up the returns for each year and then divide by
the number of years.


Average return = ( -3.5% + -5.0% + 65.0% + 13.7% ) / 4
Average return = ( 70.2% ) / 4
Average return = 17.55%

,Standard deviation = √(Σ (P * (R - E(R))^2))


Where:
P = Probability of the economic condition
R = Rate of return for the economic condition
E(R) = Expected rate of return


First, we need to calculate the expected rate of return for Canva and Green Tone:


Expected rate of return for Canva = (0.15 * -2.0%) + (0.65 * 9.2%) + (0.20 * 15.4%) =
0.0876

, Expected rate of return for Green Tone = (0.15 * 5.0%) + (0.65 * 6.2%) + (0.20 *
7.4%) = 0.0626


Now we can calculate the standard deviation for Canva:


Standard deviation for Canva = √((0.15 * (-2.0% - 8.76%)^2) + (0.65 * (9.2% -
8.76%)^2) + (0.20 * (15.4% - 8.76%)^2))
Standard deviation for Canva = √0.00263104
Standard deviation for Canva ≈ 0.051293664 = 5.13%


Next, we can calculate the standard deviation for Green Tone:


Standard deviation for Green Tone = √((0.15 * (5.0% - 6.26%)^2) + (0.65 * (6.2% -
6.26%)^2) + (0.20 * (7.4% - 6.26%)^2))
Standard deviation for Green Tone = √0.00005004
Standard deviation for Green Tone ≈ 0.007073896 = 0.71%


So the standard deviation for Canva is approximately 5.13% and the standard
deviation for Green Tone is approximately 0.71%.