Five investment alternatives have the following returns and standard deviations of returns.

Five investment alternatives have the following returns and standard deviations of returns.

     

Alternatives	Returns: Expected Value			Standard Deviation
A		$  1,820			$  550
B		860			1,030
C		5,900			1,200
D		1,980			540
E		61,000			22,100

   
 

Calculate the coefficient of variation and rank the five alternatives from lowest risk to the highest risk by using the coefficient of variation. (Round your answers to 3 decimal places.)

       

Alternatives	Coefficient of Variation	Rank
A		C
B		D
C		A
D		E
E		B

 
Explanation:

Coefficient of variation (V) = Standard deviation / Mean return

     

				Ranking from Lowest to Highest
A	$550 / $1,820	=	.302		C (.203)
B	$1,030 / $860	=	1.198		D (.273)
C	$1,200 / $5,900	=	.203		A (.302)
D	$540 / $1,980	=	.273		E (.362)
E	$22,100 / $61,000	=	.362		B (1.198)