P8-9 Rate of return, standard deviation, and coefficient of variation Mike is searching for a stock to include in his current stock portfolio. He is interested in Hi-Tech Inc.; he has been impressed with the company's computer products and believes that Hi-Tech is an innovative market player. However, Mike realizes that any time you consider a technology stock, risk is a major concern. The rule he follows is to include only securities with a coefficient of variation of returns below 0.90. Mike has obtained the following price information for the period 2015 through 2018. Hi- Tech stock, being growth oriented, did not pay any dividends during these 4 years. Stock price Year Beginning End 2015 $14.36 $21.55 2016 21.55 64.78 2017 64.78 72.38 2018 72.38 91.80 a. Calculate the rate of return for each year, 2015 through 2018, for Hi-Tech stock. b. Calculate the average return over this time period. c. Calculate the standard deviation of returns over the past 4 years.
P8-9 Rate of return, standard deviation, and coefficient of variation Mike is searching for a stock to include in his current stock portfolio. He is interested in Hi-Tech Inc.; he has been impressed with the company's computer products and believes that Hi-Tech is an innovative market player. However, Mike realizes that any time you consider a technology stock, risk is a major concern. The rule he follows is to include only securities with a coefficient of variation of returns below 0.90. Mike has obtained the following price information for the period 2015 through 2018. Hi- Tech stock, being growth oriented, did not pay any dividends during these 4 years. Stock price Year Beginning End 2015 $14.36 $21.55 2016 21.55 64.78 2017 64.78 72.38 2018 72.38 91.80 a. Calculate the rate of return for each year, 2015 through 2018, for Hi-Tech stock. b. Calculate the average return over this time period. c. Calculate the standard deviation of returns over the past 4 years.
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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How do you solve for parts b and c?
Transcribed Image Text:P8-9 Rate of return, standard deviation, and coefficient of variation Mike is searching
for a stock to include in his current stock portfolio. He is interested in Hi-Tech Inc.; he has
been impressed with the company's computer products and believes that Hi-Tech is an
innovative market player. However, Mike realizes that any time you consider a technology
stock, risk is a major concern. The rule he follows is to include only securities with a
coefficient of variation of returns below 0.90.
Mike has obtained the following price information for the period 2015 through 2018. Hi-
Tech stock, being growth oriented, did not pay any dividends during these 4 years.
Stock price
Year
Beginning
End
2015
$14.36
$21.55
2016
21.55
64.78
2017
64.78
72.38
2018
72.38
91.80
a. Calculate the rate of return for each year, 2015 through 2018, for Hi-Tech stock.
b. Calculate the average return over this time period.
c. Calculate the standard deviation of returns over the past 4 years.
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