Question

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

Answer 1

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

$\mu = 25%\\\sigma = 30%$

Coefficient of variation = $\frac{\sigma}{\bar x}$

substituting the values we get

Coefficient of variation =$\frac{30}{25} \\=1.20$

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