Calculate the average return, Financial Econometrics

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The  expected  return  and  risk  involved  in  making  an  investment  are important  factors  considered  by  investors.  The  expected  return  of  a business can be influenced by many factors. Past performance is considered to reflect expected future performance and an equal probability of 25% is assumed for all returns. Based on the analysis of past returns and forecasting, the following information is available for returns on two shares

listed on the stock exchange:

Year

Mazebe

Baduna

2009

0.20

0.16

2010

0.28

0.12

2011

0.36

0.10

2012

0.12

0.18

Required:

1 Calculate the average return for each of the two shares.

2 Calculate the risk involved by use of the standard deviation of each of the two shares.

3 Calculate the co-efficient of variation of each of the two shares.


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