Rate of return, standard deviation, coefficient of variationPersonal Finance Problem 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

1.20.

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

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. 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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Part 1

a.The rate of return for year 2012 is

enter your response here%.

(Round to two decimal places.)

Part 2

The rate of return for year 2013 is

enter your response here%.

(Round to two decimal places.)

Part 3

The rate of return for year 2014 is

enter your response here%.

(Round to two decimal places.)

Part 4

The rate of return for year 2015 is

enter your response here%.

(Round to two decimal places.)

Part 5

b.The average return over this time period is

enter your response here%.

(Round to two decimal places.)

Part 6

c.The standard deviation of returns over the past 4 years is

enter your response here%.

(Round to two decimal places.)

Part 7

d.The coefficient of variation of returns for Hi-Tech stock is

enter your response here.

(Round to two decimal places.)

Part 8

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

1.20.

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

1.20.

2012 $14.86 $20.12 2013 $20.12 $63.79 2014 $63.79 $72.45 2015 $72.45 $91.02