MChapter 09 Pre-Built Problems x tion.com/hm.tpx 15 6.76 points Problem 9-34 Ris

Question

MChapter 09 Pre-Built Problems x tion.com/hm.tpx 15 6.76 points Problem 9-34 Risk, Return, and Their Relationship LG9-3, LG9-4) Consider the following annual returns of Molson Coors and International Papor Year 2 -8.6 Year 3 Year 47.3 17.3% 37.5 16.4 0.4 26.8 11.3 Year 5 Compute each answers to 2 decimal places.) stook's average return, standard deviation, and coefficient of variation. (Round your Molson Coors return Which stock appears better? O Molson Coors O Intemational Paper Hints References eBook & Resources 2 FT

Explanation / Answer

Average return

Moison = (17.3% - 8.6% + 37.5% - 7.3% + 16.4%) / 5 = 11.06%

International = (4.7% - 17.7% -0.4% + 26.8% - 11.3%) / 5 = 0.42%

Standard deviation

Moison

= SQRT(((17.3%-11.06%)2 + (-8.6%-11.06%)2 + (37.5%-11.06%)2 + (-7.3%-11.06%)2 + (16.4%-11.06%)2 ) / (5-1))

= 19.30%

International = (4.7% - 17.7% -0.4% + 26.8% - 11.3%) / 5 = 0.42%

= SQRT(((4.7%-0.42%)2 + (-17.7%-0.42%)2 + (-0.4%-0.42%)2 + (26.8%-0.42%)2 + (-11.3%-0.42%)2 ) / (5-1))

= 17.18%

Coefficient of variation

Moison = 19.30% / 11.06% = 1.75

International = 17.18% / 0.42% = 40.90

Moison coors appear better

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