If we assume that asset X has an expected return of 10 percent and a variance of 10 percent squared, then its coefficient of variation is:
A)3.162
B)1.000
C)0.316
D)none of the above

Question

Quizplus · Accepted Answer

The coefficient of variation is the ratio of the asset's expected return to its standard deviation. In this case, the expected return is 10 percent, and the standard deviation (which is the square root of the variance) is the square root of 10 percent squared, or 10 percent. So the coefficient of variation is 10 percent divided by 10 percent, which equals 1.00. However, the question is asking for the answer in decimal format, so we divide 1.00 by 100 to get 0.316. Therefore, the correct answer is C.

If We Assume That Asset X Has an Expected Return