Rate of return, standard deviation, coefficient of variation Mike is searching for a stock to include in his current stock portfolio. He is interested in Apple Inc.; he has been impressed with the company€™s computer products and believes Apple is an innovative market player. However, Mike realizes that any time you consider a so-called high-tech 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 2006 through 2009. Apple stock, being growth-oriented, did not pay any dividends during these 4 years.

a. Calculate the rate of return for each year, 2006 through 2009, for Apple 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.
d. Eased 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 Apple stock in hisportfolio?

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Stock price 2007 14.36 2008 2009 2006 21.55 64.78 72.38 S21.55 64.78 72.38 91.80