Question

Digital Technology wishes to determine its coefficient of variation as a company over time. The firm projects the following data (in millions of dollars):

Year                Expected Value           Standard Deviation

1                      180                    62

3                      240                    104

6                      300                166

9                      400                292

Compute the coefficient of variation (V) for each time period. Round answers to the hundredth place.

Year 1=

Year 3=

Year 6=

Year 9=

Has the risk been increasing over time? Enter yes or no.

Answer 1

Given about Digital Technology,

Year                Expected Value           Standard Deviation

1                      180                    62

3                      240                    104

6                      300                166

9                      400                292

So, Coefficient of Variation = Standard deviation/Expected value

So, coefficient of variation for year 1 = 62/180 = 34.44%

coefficient of variation for year 2 = 104/240 = 43.33%

coefficient of variation for year 3 = 166/300 = 55.33%

coefficient of variation for year 4 = 292/400 = 73%

As Coefficient of Variation increases, risk of the company increase. Yes, Risk has been increasing over time.