Math Problem Statement
2017 14.31 21.62 2018 21.62 64.42 2019 64.42 71.21 2020 71.21 90.76
Question content area top Part 1 Rate of return, standard deviation, coefficient of variation Personal Finance Problem Mike is searching for a stock to include in his current stock portfolio. He is interested in Dell Technologies
Inc.; he has been impressed with the company's computer products and believes Dell
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 1.08 .
Mike has obtained the following price information for Dell
stock LOADING... . Dell
has not paid any dividends during these 4 years. a. Calculate the rate of return for each year, 2017
through 2020 , for Dell
stock. 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 for the security. e. Given the calculation in d what should be Mike's decision regarding the inclusion of Dell
stock in his portfolio? Question content area bottom Part 1 a. The rate of return for year 2017
is 51.09 %. (Round to two decimal places.) Part 2 The rate of return for year 2018
is 97.86 %. (Round to two decimal places.)
Solution
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Math Problem Analysis
Mathematical Concepts
Rate of Return
Arithmetic Mean
Standard Deviation
Coefficient of Variation
Formulas
Rate of Return = (Price at end of year - Price at beginning of year) / Price at beginning of year × 100
Average Return = Sum of Yearly Returns / Number of Years
Standard Deviation = sqrt((Σ(Ri - R_avg)^2) / (n - 1))
Coefficient of Variation = Standard Deviation / Average Return
Theorems
-
Suitable Grade Level
Grades 10-12 (High School - Personal Finance)
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