we are looking for the stock that is the MOST RISKY.

A1 What is the coefficient of variation for the stock that is the most risky (L B D F H 11 2 What is the coefficient of variation for the stock that is the most risky (use the coefficient of variation to 3 rank riskiness) and explain why do you think this stock is most risky? 4 Probability Stock M Stock N Stock M Dev Stock N Dev Stock M Dev^2 Stock N Dev^2 SM Variance SN Variance 5 0.25 12% 5% 3.30% 1.8000% 0.001089 0.000324 0.00027225 0.000081 6 0.6 8% 4% -0.70% 0.8000% 4.9E-05 6.4E-05 2.94E-05 3.84E-05 7 0.15 6% -3% -2.70% -6.2000% 0.000729 0.003844 0.00010935 0.0005766 8 0.000411 0.000696 9 Step 1: Calculate Expected Return:Sum of probabilities * RA 10 Stock M 0.087 8.70% Stock N 0.032 3.20% 12 Step 2: Get Deviation from Expected Return:RA-RAHAT) 13 Step 3: Get Sg Deviation from expected return (ra-rahat)s Step 4: Get Variance:Multiply each sq deviation with its probability then sum 15 Step 5: Calculate Standard Deviation (sqrt of variance) 16 Stock M 2.03% 17 Stock N 2.64% Step 6: Calculate Coefficiant of Variation (std dev/expected return) 19 Stock M 0.23302 Expected risk is.23330 times less than the expected return 20 Stock N 0.82443 Expected risk is.8244 times less than the expected return 21 14 18 22 Stock M is the most tisky because it's risk level is.23 times below the expected return where ass Stock N's risk level is 82 times below the expected return giving us less risk than M would give 23 24 25 26 Cover Sheet