Consider the following annual returns of Estee Lauder and Lowe's Companies: $$\begin{array} { l l l }
\hline & \begin{array} { l }
\text { Estee } \
\text { Lauder }
\end{array} & \begin{array} { l }
\text { Lowe's } \
\text { Companies }
\end{array} \
\hline 2006 & 20.4 \% & - 6.0 \% \
2005 & - 26.0 \% & 16.1 \% \
2004 & 17.6 \% & 14.2 \% \
2003 & 49.9 \% & 48.0 \% \
2002 & - 16.8 \% & - 19.0 \% \
\hline
\end{array}$$ Compute each stock's average return, standard deviation, and coefficient of variation.
A)Estee Lauder: 9.02 percent; 17.99 percent; 2.00 and Lowe's Companies: 10.66 percent; 18.99 percent; 1.78
B)Estee Lauder: 9.02 percent; 30.69 percent; 3.4 and Lowe's Companies: 10.66 percent; 18.99 percent; 1.78
C)Estee Lauder: 9.02 percent; 30.69 percent; 3.4 and Lowe's Companies: 10.66 percent; 25.46 percent; 2.39
D)Estee Lauder: 10.7 percent; 17.79 percent; 1.66 and Lowe's Companies: 12.64 percent; 18.99 percent; 1.50

Question

Consider the following annual returns of Estee Lauder and Lowe's Companies: $$\begin{array} { l l l } 
\hline & \begin{array} { l } 
\text { Estee } \
\text { Lauder }
\end{array} & \begin{array} { l } 
\text { Lowe's } \
\text { Companies }
\end{array} \
\hline 2006 & 20.4 \% & - 6.0 \% \
2005 & - 26.0 \% & 16.1 \% \
2004 & 17.6 \% & 14.2 \% \
2003 & 49.9 \% & 48.0 \% \
2002 & - 16.8 \% & - 19.0 \% \
\hline
\end{array}$$ Compute each stock's average return, standard deviation, and coefficient of variation.
A)Estee Lauder: 9.02 percent; 17.99 percent; 2.00 and Lowe's Companies: 10.66 percent; 18.99 percent; 1.78
B)Estee Lauder: 9.02 percent; 30.69 percent; 3.4 and Lowe's Companies: 10.66 percent; 18.99 percent; 1.78
C)Estee Lauder: 9.02 percent; 30.69 percent; 3.4 and Lowe's Companies: 10.66 percent; 25.46 percent; 2.39
D)Estee Lauder: 10.7 percent; 17.79 percent; 1.66 and Lowe's Companies: 12.64 percent; 18.99 percent; 1.50

Quizplus · Accepted Answer

Using a financial calculator or Excel, we find the following:

Estee Lauder:
Average return = (20.4 - 26.0 + 17.6 + 49.9 - 16.8)/5 = 9.02%
Standard deviation = 30.69%
Coefficient of variation = 30.69%/9.02% = 3.4

Lowe's Companies:
Average return = (-6.0 + 16.1 + 14.2 + 48.0 - 19.0)/5 = 10.66%
Standard deviation = 25.46%
Coefficient of variation = 25.46%/10.66% = 2.39

Therefore, the best choice is C, which correctly identifies the average return, standard deviation, and coefficient of variation for both stocks.

Consider the Following Annual Returns of Estee Lauder and Lowe's