Question
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
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 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 1.18.
Mike has obtained the following price information for the period 2015 through 20181 Hi-Tech stock, being growth-oriented, did not pay any dividends during these 4 years.
1-2015 $14.36 $20.13 2016 $20.13 $64.11 2017 $64.11 $71.92 2018 $71.92 $91.06
. 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.
(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?
Stumped on these. Don't have calc either, showing work/explanation would be great
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