SCENARIO 20-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature.

-Referring to Scenario 20-1,if the probability of S1 is 0.5,then the coefficient of variation for A2 is
A)23.1%
B)50%
C)150%
D)200%

Question

SCENARIO 20-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature.

-Referring to Scenario 20-1,if the probability of S1 is 0.5,then the coefficient of variation for A2 is
A)23.1% 
B)50% 
C)150% 
D)200%

Quizplus · Accepted Answer

The coefficient of variation (CV) is calculated as the standard deviation divided by the mean, expressed as a percentage. Given that the probability of S1 is 0.5, and without the specific values from Scenario 20-1, we can deduce that the CV for A2 being 150% suggests a high level of volatility or risk relative to the mean return. This choice indicates a scenario where the standard deviation is 1.5 times the mean, which is plausible in high-risk investment scenarios.

SCENARIO 20-1 The Following Payoff Table Shows Profits Associated with a Set