The expected returns for Stocks A, B, C, D, and E are 7 percent, 10 percent, 12 percent, 25 percent, and 18 percent, respectively. The corresponding standard deviations for these stocks are 12 percent, 18 percent, 15 percent, 23 percent, and 15 percent, respectively. Which one of the securities should a risk-averse investor purchase if the investment will be held in isolation (by itself)?

The securities should a risk-averse investor purchase if the investment will be held in isolation is A because It has the lowest coefficient of variation.

Explanation:

We use the co-efficient of variation to calculate the risk level of the given stocks. The coefficient of variation is the measurement of risk of return.  

                                     A         B           C            D           E

Expected Returns        7%       10%       12%       25%       18%

Standard Deviation     2%        18%       15%       23%       15%

Use Following Formula to Calculate  coefficient of variation.

Coefficient of variation = ( Volatility / Expected Return ) x 100

As Standard Deviation represent the volatility.

Coefficient of variation = ( Standard Deviation / Expected Return ) x 100

A. Coefficient of variation = ( 2% / 7%) x 100 = 28.57%

B. Coefficient of variation = ( 18% / 10%) x 100 = 180%

C. Coefficient of variation = ( 15% / 12%) x 100 = 125%

D. Coefficient of variation = ( 23% / 25%) x 100 = 92%

E. Coefficient of variation = ( 15% / 18%) x 100 = 83.33%

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a paragraph is a series of sentences that are organized and make sense, and are all related to a single topic . almost every piece of writing you do that is longer than a few sentences should be organized into paragraphs. this is because paragraphs show a reader where the subdivisions of an essay begin and end, and thus the reader see the organization of the essay into subjects in order to be able to understand its main points.

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