Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please advise C. Rate of return, standard deviation, coefficient of variation Personal Finance Problem Mike is searching for a stock to include in his current

Please advise C.

image text in transcribed

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 1.04. 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. 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 53.16 %. (Round to two decimal places.) The rate of return for year 2016 is 188.49 %. (Round to two decimal places.) The rate of return for year 2017 is 11.33 %. (Round to two decimal places.) Data Table The rate of return for year 2018 is 25.75 %. (Round to two decimal places.) b. The average return over this time period is 69.68 %. (Round to two decimal places.) (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) c. The standard deviation of returns over the past 4 years is %. (Round to two decimal places.) Year 2015 2016 2017 2018 Stock price Beginning $14.58 $22.33 $64.42 $71.72 End $22.33 $64.42 $71.72 $90.19

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Advanced Financial Accounting

Authors: Thomas H. Beechy

5th Edition

0131236997, 9780131236998

Students also viewed these Finance questions