Solved: Standard deviation of the market returns, Finance Basics

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Standard deviation of the market returns

Problem: The following table shows the nominal returns on U. S. stocks and the rate of inflation.

a. What was the standard deviation of the market returns?

b. Calculate the average real return.

Year Nominal Return (%) Inflation (%)
2004    12.5     3.3
2005 6.4      3.4
2006    15.8   2.5
2007     5.6    4.1
2008    -37.2    0.1

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