variance of a probability distribution is used to measure risk because a higher variance is associated with
A)a wider spread of values around the mean.
B)a more compact distribution.
C)a lower expected value.
D)both a and b
E)all of the above

Question

Quizplus · Accepted Answer

A higher variance means that the values in the distribution are more spread out around the mean. This increased variability indicates that there is a higher degree of risk associated with the distribution as there is a greater chance of outcomes being further from the expected value. Thus, choice A is the best answer.

Variance of a Probability Distribution Is Used to Measure Risk