If the variance in returns for Stock A is 400% and the expected return is 5%, then the coefficient of variation is:
A) 4
B) 80
C) .25
D) cannot be determined by this information

Question

Quizplus · Accepted Answer

The coefficient of variation is calculated as the standard deviation divided by the mean (expected return). Here, the variance is 400%, which means the standard deviation is the square root of 400%, or 20%. The expected return is 5%. Therefore, the coefficient of variation = 20% / 5% = 4.

If the Variance in Returns for Stock a Is 400