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Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Alternative A B C D Expected return 21% 22% 18% 15% Standard deviation of return 7.1% 9.2% 6.6% 4.6%

Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Alternative A B C D Expected return 21% 22% 18% 15% Standard deviation of return 7.1% 9.2% 6.6% 4.6%

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Alternative A B C Expected return 21% 22% 18% 15% Print Standard deviation of return Done 7.1% 9.2% 6.6% 4.6% I X
Transcribed Image Text:Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Alternative A B C Expected return 21% 22% 18% 15% Print Standard deviation of return Done 7.1% 9.2% 6.6% 4.6% I X
Coefficient of variation Metal Manufacturing has isolated four alternatives for meeting its need for increased production capacity. The following table summarizes data gathered relative to each of these alternatives, a. Calculate the coefficient of variation for each alternative. b. If the firm wishes to minimize risk, which alternative do you recommend? Why? a. The coefficient of variation for alternative A is (Round to three decimal places.)
Transcribed Image Text:Coefficient of variation Metal Manufacturing has isolated four alternatives for meeting its need for increased production capacity. The following table summarizes data gathered relative to each of these alternatives, a. Calculate the coefficient of variation for each alternative. b. If the firm wishes to minimize risk, which alternative do you recommend? Why? a. The coefficient of variation for alternative A is (Round to three decimal places.)
Expert Solution
Step 1: answering part a of the question

Coefficient of variation (CV) = \frac{Standard Deviation}{Expected Return}

CV of A = 0.071/0.21 = 33.8%

CV of B = 0.092/0.22 = 41.8%

CV of C = 0.066/0.18 = 36.6%

CV of D = 0.046/0.15 = 30.6%

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