Digital Technology: coefficient of variation, assessment of risk increasing
Digital Technology wishes to determine its coefficient of variation as a company over time. The firm projects the following data (in millions of dollars):
Year
Profits?
Expected Value
Standard
Deviation
1 . . . . . . . . . . . . . $180 $ 62
3 . . . . . . . . . . . . . 240 104
6 . . . . . . . . . . . . . 300 166
9 . . . . . . . . . . . . . 400 292
a. Compute the coefficient of variation (V) for each time period.
b. Does the risk (V) appear to be increasing over a period of time? If so, why might this be the case?