A stock has an expected return of 10% and a variance of 25%. Its coefficient of variation is:

A) 2.5.
B) 0.4.
C) 5.0.
D) 2.0.

Question

A stock has an expected return of 10% and a variance of 25%. Its coefficient of variation is:A) 2.5.B) 0.4.C) 5.0.D) 2.0.

sandy leung · Accepted Answer

Final Answer : C, Explanation :  The coefficient of variation (CV) is calculated as the ratio of the standard deviation of a stock's returns to its expected return. Therefore, we can calculate the CV as:CV = Standard Deviation / Expected ReturnSince the variance of the stock is given as 25%, we can find its standard deviation as the square root of the variance:Standard Deviation = sqrt(0.25) = 0.5Using the given expected return of 10%, we can calculate the stock's CV as:CV = 0.5 / 0.1 = 5Therefore, the correct answer is C, with a CV of 5.

A stock has an expected return of 10% and a variance of 25%. Its coefficient of variation is:

A) 2.5.
B) 0.4.
C) 5.0.
D) 2.0.

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