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milliebbbrown
milliebbbrown
22.07.2019 • 
Business

Rate of return, standard deviation, and coefficient of variation 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 that 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 0.90. mike has obtained the following price information for the period 2012 through 2015. hi-tech stock, being growth-oriented, did not pay any dividends during these 4 years. stock price year beginning end 2012 $14.36 $21.55 2013 21.55 64.78 2014 64.78 72.38 2015 72.38 91.80 a. calculate the rate of return for each year, 2012 through 2015, 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 these 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?

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