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The mean return on equity (ROE) for a group of firms in an industry is 15% with a variance of 9%. The coefficient of variation of the industry's ROE is __________.Multiple Choice1.70.60.25.0

Question

The mean return on equity (ROE) for a group of firms in an industry is 15% with a variance of 9%. The coefficient of variation of the industry's ROE is __________.Multiple Choice1.70.60.25.0

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Solution

The coefficient of variation (CV) is a measure of relative variability. It is the ratio of the standard deviation to the mean.

In this case, we are given the mean (15%) and the variance (9%).

The first step is to find the standard deviation. The standard deviation is the square root of the variance. So, the standard deviation in this case is sqrt(9%) = 3%.

Next, we calculate the coefficient of variation. The formula for the coefficient of variation is (standard deviation / mean) * 100.

So, CV = (3 / 15) * 100 = 20%.

Therefore, the coefficient of variation of the industry's ROE is 0.20 or 20%.

So, the answer is not in the options given. There might be a mistake in the question or the options provided.

This problem has been solved

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