Objective: Calculate returns and riskiness of returns for various assets
Introduction: Standard deviation is a proven mathematical methodology to measure the level of volatility for return on investments. When financial managers compare two funds with identical annualized returns, the fund with a lower standard deviation is typically the most attractive. The most common measure used for fund evaluation is standard deviation.
Deliverables: 2-3 page paper
Activity Details:
Step 1: Introduction about Standard Deviation and Risk
Provide a definition and introduction about “standard deviation” and explain how it is used to quantify risk.
The overall written analysis essay should include a minimum of three references cited within the content of the paper and the reference page according to APA guidelines.
Step 2: Standard Deviation 5 Step Procedure
Examine, in order, the five-step procedure for finding the standard deviation. Provide a brief description of each step and its purpose when possible. Review internal course readings and external sites about the standard deviation five-step procedure.
Note: you may find external sites that use more than five steps. It is okay to include and write about more than five standard deviation steps. Optional: Insertion of an Excel example
Describe and address:
How to calculate the expected rate of return of the investment

Why it is best practice to subtract the expected rate of return of 15% from each of the possible rates of return and square the difference?

Explain the purpose for multiplying the squared differences calculated in step 2 by the probability that those outcomes will occur

Why it is necessary to sum all the values calculated in step 3 together?

What does the square root of the variance calculated in step 4 describe?
Step 3: Asses and Conclude
Assess whether it is possible to diversify away the risk inherent in investments

Assess whether the standard deviation of a portfolio is, or is not, a weighted average of the standard deviations of the assets in the portfolio

Write a brief summary conclusion of what you have learned about “standard deviation” and how it is used quantify risk
Please review the link provided below, containing the essay rubric, prior to proceeding:
Essay Rubric