9-33 Risk, Return, and Their Relationship Consider the following annual returns

Question

9-33  Risk, Return, and Their Relationship Consider the following annual returns of Estee Lauder and Lowe’s Companies: Years Estee Lauder Lowe's companies Year 1 23.40% -6% Year 2 -26% 16.10% Year 3 17.60% 4.20% Year 4 49.90% 48% Year 5 -16.80% -19% Compute each stock’s average return, standard deviation, and coefficient of variation. Which stock appears better? Why? (LG9-3, LG9-4) 9-33  Risk, Return, and Their Relationship Consider the following annual returns of Estee Lauder and Lowe’s Companies: Years Estee Lauder Lowe's companies Year 1 23.40% -6% Year 2 -26% 16.10% Year 3 17.60% 4.20% Year 4 49.90% 48% Year 5 -16.80% -19% Compute each stock’s average return, standard deviation, and coefficient of variation. Which stock appears better? Why? (LG9-3, LG9-4)

Explanation / Answer

Years Estee Lauder Lowe's companies Year 1 23.40% -6% Year 2 -26% 16.10% Year 3 17.60% 4.20% Year 4 49.90% 48% Year 5 -16.80% -19% Average Return 9.62% AVERAGE(C5:C9) 8.66% AVERAGE(D5:D9) Standard deviation 27.72% STDEV.P(B5:B9) 22.82% STDEV.P(D5:D9) Coefficient of variation             2.88 27.72/9.62                      2.63 22.82/8.66 Conclusion: Based on COV Lowes spread is lower i.e. it is less risky as compared to its return and is better than Estee Lauder

Related Questions

Navigate

• Browse (All)
• Browse 9
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.