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 .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.

Stock Price

Year

Beginning

End

2015

$14.36

$21.55

2016

21.55

64.78

2017

64.78

72.38

2018

72.38

91.80

a.Calculate the rate of return for each year, 2015 - 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.

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?