You are a hotel manager considering four projects that yield different payoffs,depending upon whether there is an economic boom or a recession.The potential payoffs and corresponding payoffs are summarized in the following table. $$\begin{array} { | l | l | l | }
\hline \text { Praject } & \begin{array} { l }
\text { Bamn } \
( 50 \% )
\end{array} & \begin{array} { l }
\text { Recession } \
( 50 \% )
\end{array} \
\hline \text { A } & \$ 40 & - \$ 20 \
\hline \text { B } & - \$ 10 & \$ 30 \
\hline \text { C } & \$ 50 & - \$ 50 \
\hline \text { D } & \$ 60 & \$ 60 \
\hline
\end{array}$$ Which project has the highest variance?

Question

You are a hotel manager considering four projects that yield different payoffs,depending upon whether there is an economic boom or a recession.The potential payoffs and corresponding payoffs are summarized in the following table. $$\begin{array} { | l | l | l | } 
\hline \text { Praject } & \begin{array} { l } 
\text { Bamn } \
( 50 \% )
\end{array} & \begin{array} { l } 
\text { Recession } \
( 50 \% )
\end{array} \
\hline \text { A } & \$ 40 & - \$ 20 \
\hline \text { B } & - \$ 10 & \$ 30 \
\hline \text { C } & \$ 50 & - \$ 50 \
\hline \text { D } & \$ 60 & \$ 60 \
\hline
\end{array}$$ Which project has the highest variance?

Quizplus · Accepted Answer

Project C has the highest variance because the difference between its potential payoffs (\$50 in a boom and -\$50 in a recession) is the greatest, indicating the highest level of risk or variability in outcomes.

You Are a Hotel Manager Considering Four Projects That Yield