Question

McLeod Inc. is considering an investment that has an expected return of 8% and a standard deviation of 10%. What is the investment's coefficient of variation?

Answer 1

the investment's coefficient of variation is 1.25.

Step-by-step explanation:

The coefficient of variation relates the units of return to the units of risk. It expresses the unit of risk per 1% of return as follows :

Coefficient of Variation = Standard Deviation ÷ Return

Therefore,

Coefficient of Variation = 10 ÷ 8

= 1.25