The standard deviations (in thousands of dollars) for building a small and large complex are 535 and 976, respectively. Based on the resulting coefficients of variation (CV), which of the following statements would be true?
A) The CV of building a large complex is less than that of building a small complex.
B) The CV of building a small complex is less than that of building a large complex.
C) The risk averse action would be to build a large complex.
D) Since the CV of building a large complex is less than that of building a small complex, the risk averse action would be to build a large complex.
E) The CV of building a small complex is about the same as that of building a large complex.

Question

Quizplus · Accepted Answer

The coefficient of variation (CV) is the ratio of the standard deviation to the mean. Since the standard deviation of building a large complex is higher than that of building a small complex, and assuming the means are comparable, the CV of building a small complex would be lower than that of building a large complex. Therefore, statement B is true. Statements A, C, and D are incorrect. Statement E is vague and cannot be confirmed without additional information about the means of building each complex.

The Standard Deviations (In Thousands of Dollars) for Building a Small