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

Question

Quizplus · Accepted Answer

The relative dispersion can be calculated as follows:

- For price-earnings ratios: 
Relative Dispersion = (Standard Deviation / Mean) * 100 
Relative Dispersion = (1.8 / 10.9) * 100 
Relative Dispersion = 16.5 percent

- For return on investment: 
Relative Dispersion = (Standard Deviation / Mean) * 100 
Relative Dispersion = (5.2 / 25) * 100 
Relative Dispersion = 20.8 percent

Therefore, the best choice is B, which matches the calculated relative dispersion values.

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