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

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Suitable Grade Level

Grades 10-12 (High School - Personal Finance)