Dividing the standard deviation of the returns of a stock by the stock's expected return gives us the stock's _____.
A)variance
B)risk premium
C)coefficient of variation
D)beta
E)correlation coefficient

Question

Dividing the standard deviation of the returns of a stock by the stock's expected return gives us the stock's _____. 
A)variance
B)risk premium
C)coefficient of variation
D)beta
E)correlation coefficient

Quizplus · Accepted Answer

The coefficient of variation (CV) is calculated by dividing the standard deviation of a security's returns by its expected return. It measures an investment's risk per unit of return and can be used to compare the risk of different securities, which makes it a helpful tool when constructing a diversified portfolio.

Dividing the Standard Deviation of the Returns of a Stock