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Financial analysts like to use the standard deviation as a measure of risk for a stock. the greater the deviation in a stock price over time, the more risky it is to invest in the stock. however, the average prices of some stocks are considerably higher than the average price of others, allowing for the potential of a greater standard deviation of price. for example, a standard deviation of $5.00 on a $10.00 stock is considerably different from a $5.00 standard deviation on a $40.00 stock. in this situation, a coefficient of variation might provide insight into risk. suppose stock x costs an average of $32.00 per share and showed a standard deviation of $3.15 for the past 60 days. suppose stock y costs an average of $83.00 per share and showed a standard deviation of $5.60 for the past 60 days. use the coefficient of variation to determine the variability for each stock.

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The coefficient of variation of stock x is 9.84

The coefficient of variation of stock y is 6.22

What is coefficient of variation?

The coefficient of variation is a term used in statistics to show the spread of data points. The coefficient of variation shows the relationship between data points in terms of the dispersion or spread of the data. This relationship is of good help to investors while making decisions,

How to determine the variability of each stock

coefficient of variation of stock x is gotten by

( standard deviation of x / average of x ) * 100 / 1

= 3.15 / 32 * 100 / 1

= 0.0984 * 100

= 9.84

coefficient of variation of stock y is gotten by

( standard deviation of y / average of y ) * 100 / 1

= 5.16 / 83 * 100 / 1

= 0.0622 * 100

= 6.22

The coefficient of stock x is more than the coefficient of stock y. Therefore stock x has more variability than stock y

Read more on coefficients of variation here: https://brainly.com/question/19616808

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