Stocks A, B, and C have expected returns of 12 percent, 12 percent, and 10 perce

ID: 2636050 • Letter: S

Question

Stocks A, B, and C have expected returns of 12 percent, 12 percent, and 10 percent, respectively, while their standard deviations are 44 percent, 27 percent, and 27 percent, respectively. If you were considering the purchase of each of these stocks as the only holding in your portfolio and the risk-free rate is 0 percent, which stock should you choose? (Hint: the Coefficient of Variation (CV) measures the risk of an investment for each 1% of expected return; in other words, the higher the CV, the greater the risk.) (Round answer to 2 decimal places, e.g. 15.25.)

Coefficient of variation of Stock A Coefficient of variation of Stock B Coefficient of variation of Stock C Stocks A, B, and C have expected returns of 12 percent, 12 percent, and 10 percent, respectively, while their standard deviations are 44 percent, 27 percent, and 27 percent, respectively. If you were considering the purchase of each of these stocks as the only holding in your portfolio and the risk-free rate is 0 percent, which stock should you choose? (Hint: the Coefficient of Variation (CV) measures the risk of an investment for each 1% of expected return; in other words, the higher the CV, the greater the risk.) (Round answer to 2 decimal places, e.g. 15.25.)

Explanation / Answer

Green Mountain Financial Inc.

Schedule of Cash Payments for Selling and Administrative Expenses

For the Three Months Ending May 31, 2014

March

April

May

March expenses:

45800-8000

= 37800

Paid in March

37800*60%

= 22680

Paid in April

37800*40%

= 15120

April expenses:

56900