Macro Corporation has had the following returns for the past three years, -10%, 10%, and 30%. Calculate the standard deviation of the returns. Notes by professor: For this type of question, I didn't assign the specific probability of the state because they represent three historical data points. The formula for expected return and variance are as follows Expected return = ER 1/N *(r1+r2+..rN); Variance =Var = 1/(N-1) *[(r1 - ER)^2 + (r2 - ER)^2 +... (IN - ER)^2] Standard deviation = SQRT(Var) . The convention is to use an equal weight, 1/N, for the expected return. However, notice the weight of 1/(N-1) used in the variance calculation. This is usually used as a convention to reduce bias for a small sample (related to degrees of freedom). 20% 10% O o 30% 0 40%