FIN 350 Week 7 Complete


FIN 350 Week 7 Module 7 Practice Problems

Follow these instructions for completing and submitting your assignment:

1. Do all work in Excel. Do not submit Word files or *.pdf files.

2. Submit a single spreadsheet file for this assignment. Do not submit multiple files.

3. Place each problem on a separate spreadsheet tab.

4. Label all inputs and outputs and highlight your final answer.

5. Follow the directions in the “Guidelines for Developing Spreadsheets.”

P8–9 Rate of return, standard deviation, and coefficient of variation 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

that Hi-Tech is an innovative market player. However, Mike website realizes that any

time you consider a technology stock, risk is a FIN 350 major concern. The rule he follows

is to include only securities with a coefficient of variation of returns below 0.90.

Mike has obtained the following price information for the period 2012 through

2015. Hi-Tech stock, being growth-oriented, did not pay any dividends during these

4 years.

Stock price

Year Beginning End

2012 $14.36 $21.55

2013 21.55 64.78

2014 64.78 72.38

2015 72.38 91.80

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?

FIN 350 Grand Canyon Week 7 get more info Complete Work

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