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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
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 1.02. 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. i Data Table 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 (Click on the icon located on the top-right corner of the data table below in order to e. Given the calculation in d what should be Mike's decision regarding the inclusion of Hi-Tech stock in his portfolio? copy its contents into a spreadsheet.) Stock price a. The rate of return for year 2015 is % (Round to two decimal places.) Year Beginning End 2015 $14.72 $22.31 2016 $22.31 $63.67 2017 $63.67 $71.63 2018 $71.63 $91.75
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