Sunny Side Condominiums recently purchased land outside of Phoenix and is
Trying to decide the size complex it should build (large or small). The following payoff
Table (in thousands of dollars) considers three possible levels of demand. If there is a
45% chance that the demand level will be low, 30% that it will be medium and 25%
Chance that it will be high. Moreover, 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) Both A and C
E) Both B and C

Question

Sunny Side Condominiums recently purchased land outside of Phoenix and is
Trying to decide the size complex it should build (large or small). The following payoff
Table (in thousands of dollars) considers three possible levels of demand. If there is a
45% chance that the demand level will be low, 30% that it will be medium and 25%
Chance that it will be high. Moreover, 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) Both A and C 
E) Both B and C

Quizplus · Accepted Answer

The Answer of Sunny Side Condominiums recently purchased land outside of Phoenix and is
Trying to decide the size complex it should build (large or small). The following payoff
Table (in thousands of dollars) considers three possible levels of demand. If there is a
45% chance that the demand level will be low, 30% that it will be medium and 25%
Chance that it will be high. Moreover, 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) Both A and C 
E) Both B and C

Sunny Side Condominiums Recently Purchased Land Outside of Phoenix and Is