Standard deviation versus coefficient of variation as measures of risk Greengage, Inc., a successful nursery, is considering several expansion projects. All the alternatives promise to produce an acceptable return. Data on tour possible projects appear in the following table: a. Which project is least risky, judging on the basis of range? Which project has the lowest standard deviation? Explain why standard deviation may not be an entirely appropriate measure of risk for purposes of this comparison c. Calculate the confficient of variation for each project. Which project do you think Greengage's awnors should choose? a. Which project is least risky. Judging on the basis of range? (Select the best answer below.) A. Project D OB. Project C. Praject D. Project b. Which project is least risky, judging on the basis of standard deviation? (Select the best answer below.) CA. Project B. Project D C. Project A OD. Project C Explain why standard deviation may not be an entirely appropriate measure of risk for purposes of this comparison. (Select the best answer below.) CA. The standard deviation measure talls to take into account both the risk-free rate and the return of the investment. Investors would prefer higher return but less volatility, and the coefficient of variation provides a measure that takes into account both aspects of investors' preferences OB. The standard deviation measure fails to take into account both the volatility and the retum of the investment. Investors would prefer lower return but higher volatility, and the coefficient of variation provides a measure that takes into account bath aspects of investors' preferences. CC. The standard deviation measure fails to take into account both the volatility and the risk-free rate. Investors would prefer higher return but less volatility, and the coefficient of variation provides a measure that takes into account both aspects of investors' preferences. OD. The standard deviation measure talls to take into account both the volatility and the retum of the investment Investors would prefer higher return but less volatility, and the coefficient of variation provides a measure that takes into account both aspects of investors' preferences c. The coeficient of variation for project Ais . (Aound to three decimal places. The coefficient of variation for project Bis I. (Round to three decimal places.) The coefficient of variation for project is - (Round to three decimal places. The coefficient of variation for project Dis (Round to three decimal places.) Which project will Greengage's awners choose, judging on the basis of coefficient of variation? (Select the best answer bekow.) O A. Project B. Praject A C. Project B CD Project (Click on the icon here - in order to copy the contents of the data table below into a spreadsheet.) Project A B D Expected return 13.5% 13.5% 11.6% 12.9% Standard Range deviation 4.2% 3.9% 3.8% 3.4% 4.4% 3.5% 4.5% 2.9%
