A colleague advises Ahmad on a new bond with a substantial credit rating

Finance Aug 12, 2020

A colleague advises Ahmad on a new bond with a substantial credit rating. It has variance of 24% and an expected return of 5%. What is the coefficient of variation, CV?

Expert Solution

Coefficient of Variation = Standard Deviation / Mean ( Expected return)

Variance = Standard Deviation^(1/2)

= 24%^(1/2)

= 0.48989794855

Coefficient of variation = 0.48989794855 /0.05

= 9.797958971

Coefficient of Variation = 9.797958971 TImes

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