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Instruction on calculating Standard Deviation in Excel

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Standard Deviation Formula

Standard Deviation:

= Probability

E( R )= Expected Return

= Variance

= Standard Deviation

2. Calculate the Expected Return

To calculate the Expected Return, the return column should get multiplied by probability column:

Select a cell in excel

Enter the = sign in the cell

Select return cell, the * sign and then select the probability cell

Press Enter

Now we need the same formula for the rest of the cells, to do that we are going to drag:

Place your mouse in the lower right corner of the cell (in this case D3), once you see the filled in plus sign, left click and drag down

2. Calculate the Expected Return Cont.

The next step in calculating the expected return is to add all the values in column “Return*Prop”

Select a cell in excel

Enter the = sign in the cell

Type in SUM

Double click on the formula and select the data

Close parenthesis

Press Enter

3. Find the R – E( R )

On the next column near the data

Enter the equal sign

Select the first return

Enter the minus sign

Select the expected return

Enter

3. Continue

- Next we want to copy the formula for the rest of the rows. To do this we need to make the expected returncell fixed
- For that select the cell
- Click next to the cell number (that contains the expected return) which in this example is D8
- Add $ next to cell column and row. i.e. $D$8

3. Continue

Now place your mouse in the lower right corner of the cell, once you see the filled in plus sign, left click and drag down

4. [R – E( R )]^2

Go to the next column on the first row

Enter the equal sign

Select the R - ER cell, in this example E3

Then Shift + 6 ( to add ^ sign)

The number 2

Enter

4. Continue

Now we need the same formula for all the other values. So place your mouse in the lower right corner of the cell, once you see the filled in plus sign, left click and drag down

5. P * [R – E( R )]^2

Select a cell in excel

Enter the = sign in the cell

Select probability cell, the * sign and then select the [R – E( R )]^2 cell

Press Enter

5. Cont.

Now we need the same formula for the rest of the cells:

Place your mouse in the lower right corner of the cell once you see the filled in plus sign, left click and drag down

6. Sum P*[R – E( R )]^2

Select a cell

Enter the equal sign

Enter the word SUM

Double click on the formula

Select the data

Enter

7. Take square root

This is the last step. We need to take the square root of the number we found in part 6. To do that follow the following steps:

Enter the equal sign into a cell

Then type SQRT and select Excel's formula

Select the cell from step 6

Enter

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