a. Calculate the rate of return for each year, 2012 through 2015, for Hi-Tech 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 these 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?
P8 – 10 Assessing return and risk Swift Manufacturing must choose between two asset purchases. The annual rate of return and the related probabilities given in the following table summarize the firm’ s analysis to this point.
Project 257 Project 432 Rate of return Probability Rate of return Probability −10 % 0.01 10 % 0.05 10 0.04 15 0.10 20 0.05 20 0.10 30 0.10 25 0.15 40 0.15 30 0.20 45 0.30 35 0.15 50 0.15 40 0.10 60 0.10 45 0.10 70 0.05 50 0.05