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 1.08.

Mike has obtained the following price information for the period 2012 through 2015:

Hi-Tech stock, being growth-oriented, did not pay any dividends during these 4 years.

a. Calculate the rate of return for each year, 2012 through 2015, 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?

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a. The rate of return for year 2012 is ________ %. (Round to two decimal places.)

The rate of return for year 2013 is ________ %. (Round to two decimal places.)

The rate of return for year 2014 is __________%. (Round to two decimal places.)

The rate of return for year 2015 is ______% (Round to two decimal places.)

b. The average return over this time period is _______ %. (Round to two decimal places.)

c. The standard deviation of returns over the past 4 years is _____%. (Round to two decimal places.)

d. The coefficient of variation of returns for Hi-Tech stock is _____. (Round to two decimal places.)

e. Given the calculation in d what should be Mike's decision regarding the inclusion of Hi-Tech stock in his portfolio? (Select the best answer below.)

Mike will include Hi-Tech stock in his portfolio because the coefficient of variation of the security is below 1.08

Mike will not include Hi-Tech stock in his portfolio because the coefficient of variation of the security is not below 1.08

Stock price Year 2012 2013 2014 2015 Beginning S14.T $21.79 $64.16 $72.32 End $21.79 $64.16 $72.32 $91.24