Question

P8-9 (similar to)

Rate of​ return, standard​ deviation, coefficient of variation  Personal Finance Problem   Mike is searching for a stock to include in his current stock portfolio. He is interested in​ Hi-Tech Inc.; he has been impressed with the​ company's computer products and believes​ Hi-Tech is an innovative market player. ​ However, Mike realizes that any time you consider a technology​ stock, risk is a major concern. The rule he follows is to include only securities with a coefficient of variation of returns below

1.12.

Mike has obtained the following price information for the period

2015

through

2018​:

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. ​ Hi-Tech stock, being​ growth-oriented, did not pay any dividends during these 4 years.a.  Calculate the rate of return for each​ year,

2015

through

2018​,

for​ Hi-Tech stock.

b.  Assume that each​ year's return is equally probable and calculate the average return over this time period.

c.  Calculate the standard deviation of returns over the past 4 years.  

​(Hint​:

Treat this data as a​ sample.)

d.  Based on b and c determine the coefficient of variation of returns for the security.

e.  Given the calculation in d what should be​ Mike's decision regarding the inclusion of​ Hi-Tech stock in his​ portfolio?

a.  The rate of return for year

2015

is

nothing​%.

​(Round to two decimal​ places.)

STOCK PRICE

YEAR BEGINNING END

2015   $14.94   $20.99
2016   $20.99   $63.49
2017   $63.49   $71.47
2018   $71.47   $91.95

Answer 1

As nothing was mentioned excel is used. If you need with “statistical formula”, let me know, will do that also. Thank you