00:01
In question we have been given with three stocks having their mean yearly return and their standard deviation and we need to find out which of the stock is riskier.
00:10
So for that, first of all, we will be calculating the coefficient of variation and this coefficient of variation denoted with cov actually determines or measures the variation that is the standard deviation in context to its yearly mean return.
00:26
So we have the formula of standard deviation here.
00:28
So what we will be doing is we will be calculating the coefficient of variation for three different stocks.
00:33
So for first stop, we have the standard deviation of 41 .96 % and its yearly mean return is 10 .93.
00:43
And this times 100 is going to get us the coefficient of variation that is 383 .87%.
00:51
So we will be writing here 383 .87.
00:55
7 similarly the coefficient of variation for the second stock that is stock number 2 is going to be 9 .36 is its standard deviation and its yearly mean return is 13 and this times 100 gives us 72 percent so 72 is the coefficient of variation for second stock now similarly for third stock we will be having the coefficient of variation of 41 .6 divided by 34 .45 times 100 and this gives us 120 .75.
01:33
So, 120 .750.
01:36
Now, if we compare the coefficient of variation of these three stock, we can see that stock one has the highest coefficient of variation, that is 3 ,383 .897.
01:48
That means the standard deviation in context to its mean return of 10 .93.
01:54
If we compare this mean return of 10 .93 of stock 1 and its standard deviation of 41 .96, then the variation is going to be how much? 383 .897...