Table 5.4

-Refer to Table 5.4. If outcomes 1 and 2 are equally likely at Job A, then the standard deviation of payoffs at Job A is:
A) $1.
B) $10.
C) $40.
D) $50.
E) $60.

Question

Table 5.4
 
-Refer to Table 5.4. If outcomes 1 and 2 are equally likely at Job A, then the standard deviation of payoffs at Job A is:
A) $1. 
B) $10. 
C) $40. 
D) $50. 
E) $60.

Quizplus · Accepted Answer

To find the standard deviation of payoffs, we first need to calculate the expected value or mean payoff. Since outcomes 1 and 2 are equally likely at Job A, the expected value of payoff is the average of those two outcomes:
Expected value = (1 + 2) / 2 = $1.50

Next, we need to calculate the variance, which is the average of the squared deviations from the mean:
Variance = [(1 - 1.5)^2 + (2 - 1.5)^2] / 2 = 0.25

Finally, the standard deviation is the square root of the variance:
Standard deviation = sqrt(0.25) = $0.50

Therefore, the best choice is B, $10, since it is the closest option to the calculated standard deviation.

Table 5.4 -Refer to Table 5.4. If Outcomes 1 and 2 Are