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 2015 through 2018. 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. Calculate the average return over this time period.
c. Calculate the standard deviation of returns over the past 4 years.
d. Based on parts b and c, determine the coefficient of variation of returns for the security.
e. Given the calculation in part d, what should be Mike’s decision regarding the inclusion of Hi-Tech stock in his portfolio?

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Stock price End Year Beginning 2015 $14.36 $21.55 2016 21.55 64.78 2017 64.78 72.38 2018 72.38 91.80