The table below contains information on the expected return and standard deviation of

three securities, A, B and C.

Security A

B

C

Expected return (%) Standard deviation (%) 10 7

15 9

20 10

An investor wants to choose any one of the following three options:

I) Investing entirely in security A

II) Investing entirely in security B

III) Investing 50% of the amount in security A and 50% in security C. Correlation

coefficient between the returns of security A and C is 1.

Required

i) Determine the coefficient of variation for each of the three options

(6 marks)

ii) Recommend the best option for the investor (2 marks)