Which of the two securities are the best? By using probability estimates, below is the computation of ff. statistics:StatisticSecurity ASecurity BExpected return Standard deviation12%20%8%10%RequirementCalculate the coefficient of variation for each securityExplain why the standard deviation and coefficient of variation give different ranking of risk. Which method is superior and why?

Coefficient of variation of Security A: Standard deviation/ Mean(or Expected return ) = 0.20 /…

Answered: Calculate the coefficient of variation…

Calculate the coefficient of variation for each security Explain why the standard deviation and coefficient of variation give different ranking of risk. Which method is superior and why?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 3Q: Security A has an expected return of 7%, a standard deviation of returns of 35%, a correlation...

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Question

Which of the two securities are the best? By using probability estimates, below is the computation of ff. statistics:

Statistic

Security A

Security B

Expected return

Standard deviation

12%

20%

10%

Requirement

Calculate the coefficient of variation for each security
Explain why the standard deviation and coefficient of variation give different ranking of risk. Which method is superior and why?

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