Standard deviation versus coefficient of variation as measures of risk Greengage, Inc., a successful nursery, is considering several expansion projects. All of the alternatives promise to produce an acceptable return. Data on four possible projects appear in the following table ! a. Which project is least risky, judging on the basis of range? Data Table b. 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 coefficient of variation for each project which project do you think Greengage's owners should choose? a. Which project is least risky, judging on the basis of range? (Select the best answer below.) O A Project B O B. Project OC. Project D OD Project A b. Which project is least risky, judging on the basis of standard deviation? (Select the best answer below.) O A Project A OB. Project D OC. Project OD Project B Explain why standard deviation may not be an entirely appropriate measure of risk for purposes of this comparison (Select the best answer below) O O A. The standard deviation measure fails to take into account both the risk tree 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 B. The standard deviation measure fois to take into account both the volatility and the return of the investment. Investors would prefer lower return but higher volatility, and the coefficient of variation provides a measure that takes into account both aspects of investors' preferences C. 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 D. The standard deviation measure fails to take into account both the volatility and the return of the investment Investors would prefer higher return but coeficient of yaration provides a measure that takes into account both aspects of invest O O - Oto You Think Greengage's owners should choose? c. The coefficient of variation for project Ais (Round to three decimal places.) The coefficient of variation for project Bis (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 wil Greengage's owners choose, judging on the basis of coefficient of variation? (Select the best answer below.) OA Project O B. Project D OC. Project A Data Table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) U Project Expected return 13.2% 12.9% 12.7% 13.1% OUD Range 4.9% 4.6% 4.2% Standard deviation 3.1% 2.6% 3.5% 3.6% U 5.2% DU
