A research analyst wants to compare the dispersion in the price-earnings ratios for a group of common stock with their return on investment. For the price-earnings ratios, the mean is 10.9 and the standard deviation is 1.8. The mean return on investment is 25 percent and the standard deviation 5.2 percent. What is the relative dispersion for the price-earnings ratios and return on investment?
A) Ratios = 32.0 percent, investment = 19.0 percent
B) Ratios = 16.5 percent, investment = 20.8 percent
C) Ratios = 132.0 percent, investment = 190.0 percent
D) Ratios = 50.0 percent, investment = 10.0 percent
E) None of the choices are correct.

Question

Quizplus · Accepted Answer

The relative dispersion, or coefficient of variation, is calculated as (standard deviation / mean) * 100. For price-earnings ratios: (1.8 / 10.9) * 100 = 16.5%. For return on investment: (5.2 / 25) * 100 = 20.8%.

A Research Analyst Wants to Compare the Dispersion in the Price-Earnings