You are searching for a stock to add to your current stock portfolio. You are interested in DePaul, Inc. You realize that any time you consider a technology stock, it involves elevated risk. The rule you follow is to include only stocks with a coefficient of variation of returns below 1.02. You have obtained the following price information and dividend information: Year Starting Price Ending price Quarterly Dividend 1 $40.00 $42.00 $0.50 2 $42.00 $47.40 $0.75 3 $47.40 $43.40 $1.00 4 $43.40 $53.40 $1.25 Calculate the annual rate of return for each year, 1 through 4, for DePaul stock Assume that each year's return is equally probable and calculate the average return over this time period. Calculate the standard deviation of returns over the 4 years. Based on b and c determine the coefficient of variation of returns for the security. Does an investment in this stock fall within the parameters of your investment policy?
DePaul, Inc.
You are searching for a stock to add to your current stock portfolio. You are interested in DePaul, Inc. You realize that any time you consider a technology stock, it involves elevated risk. The rule you follow is to include only stocks with a coefficient of variation of returns below 1.02. You have obtained the following price information and dividend information:
Year Starting Price Ending price Quarterly Dividend
1 $40.00 $42.00 $0.50
2 $42.00 $47.40 $0.75
3 $47.40 $43.40 $1.00
4 $43.40 $53.40 $1.25
- Calculate the annual
rate of return for each year, 1 through 4, for DePaul stock - Assume that each year's return is equally probable and calculate the average return over this time period.
- Calculate the standard deviation of returns over the 4 years.
- Based on b and c determine the coefficient of variation of returns for the security.
- Does an investment in this stock fall within the parameters of your investment policy?
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