2nd Assignment_Palita Rana P. (19218007).pdf - Palita Rana Putinagari(19218007 1 Mike is searching for a stock to include in his current stock portfolio

# 2nd Assignment_Palita Rana P. (19218007).pdf - Palita Rana...

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Palita Rana Putinagari (19218007) 1. Mike is searching for a stock to include in his current stock portfolio. He is interested in HiTech Inc.; he has been impressed with the company’s computer products and believes HiTech 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 0.90. Stock Price Year Beginning End 2009 \$14.36 \$21.55 2010 21.55 64.78 2011 64.78 72.38 2012 72.38 91.80 a. Calculate the rate of return for each year, 2009 through 2012, 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 HiTech stock in his portfolio?
2. Three assets—F, G, and H—are currently being considered by Perth Industries. The

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• Fall '19
• Probability theory

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