Risk and Rates of Return

Returns earnec over a civen to estimate fu time period are called realized returns. Historical data on realized returns is often used lysts across companies use realized stock returns to estimate the risk of a stock. Consider the case of Happy Dog Soap Inc. (HDS) Five years of realized returns for HDS are given in the following table. Remember: 1. While HDS was started 40 years ago, its common stock has been publidy traded for the past 25 years. 2. The returns on its equity are calculated as arithmetic returns. 3. The historical returns for HDS for 2012 to 2016 are: 2012 2013201420152016 Stock return 23.75% 16.15% 28.50% 39.90% 12.35% Given the preceding data, the average realized return on HDS's stock is 24.13% The preceding data series representsa sampleof HDS's historical returns. Based on this conclusion, the standard deviation of HDS's historical returns is If investors expect the average realized return from 2012 to 2016 on HDS's stock to continue into the future, its coefficient of variation (CV) will be