Reference no: EM132481487
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? 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 0.99
Mike has obtained the following price information for the period 2015 through 2018
2015 $14.44 $22.96
2016 $22.96 $64.96
2017 $64.96 $71.94
2018 $71.94 $91.67
Hi-Tech stock, being? growth-oriented, did not pay any dividends during these 4 years.
a. Calculate the rate of return for each? year, 2015
b. Assume that each? year's return is equally probable and calculate the average return over this time period.
c. Calculate the standard deviation of returns over the past 4 years. ?(Hint?: Treat this data as a? sample.)
d. Based on b and c determine the coefficient of variation of returns for the security.
e. Given the calculation in d what should be? Mike's decision regarding the inclusion of? Hi-Tech stock in his? portfolio?