Liz Chapa manages a portfolio of 250 common stocks. Her staff compiled the following performance statistics for two new stocks. The coefficient of variation for Salas Products,Inc.is __________.

Question

Liz Chapa manages a portfolio of 250 common stocks. Her staff compiled the following performance statistics for two new stocks.  The coefficient of variation for Salas Products,Inc.is __________.

Quizplus · Accepted Answer

The coefficient of variation (CV) measures the relative variability of a stock's return compared to its mean. It is calculated as the standard deviation of the stock's returns divided by its mean return, expressed as a percentage.

CV = (standard deviation / mean) x 100%

To calculate the CV for Salas Products, we need the standard deviation and mean return for this stock. Unfortunately, the problem does not provide us with this information. Therefore, we cannot directly calculate the CV for Salas Products.

However, we can use some common sense and eliminate some answer choices based on the range of typical CV values. Generally, a CV of 100% or higher is quite high and suggests a very volatile stock. A CV of 5% or lower is quite low and suggests a relatively stable stock. Therefore, we can eliminate answer choices A and D.

Answer choice B is also unlikely, as it suggests that Salas Products has no relative variability compared to its mean return. This is unlikely in practice.

Answer choice E is possible, but it is difficult to assess based on our limited information.

Therefore, answer choice C (33%) is the best choice based on what we know. This suggests that Salas Products has moderate relative variability compared to its mean return.

Liz Chapa Manages a Portfolio of 250 Common Stocks