Erickson Inc. is considering a capital budgeting project that has an expected return of 25% and a standard deviation of 30%.

What is the project's coefficient of variation?

a. 1.20
b. 1.26
c. 1.32
d. 1.39
e. 1.46

Respuesta :

Answer:

a. 1.20

Step-by-step explanation:

Given that Erickson Inc. is considering a capital budgeting project that has an expected return of 25% and a standard deviation of 30%.

i.e. given that

[tex]\mu = 25%\\\sigma = 30%[/tex]

Coefficient of variation = [tex]\frac{\sigma}{\bar x}[/tex]

substituting the values we get

Coefficient of variation =[tex]\frac{30}{25} \\=1.20[/tex]

Out of the four options given we find only one option a is the correct answer.

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