TABLE 19-2
The following payoff matrix is given in dollars.
-Referring to Table 19-2, the coefficient of variation for Action A is
A) 12.8%.
B) 33.3%.
C) 133.33%.
D) 333.3%.

Question

TABLE 19-2
The following payoff matrix is given in dollars. 
-Referring to Table 19-2, the coefficient of variation for Action A is
A) 12.8%. 
B) 33.3%. 
C) 133.33%. 
D) 333.3%.

Quizplus · Accepted Answer

The coefficient of variation is calculated as the standard deviation divided by the expected value. For Action A, the expected value is (0.5 x 400) + (0.5 x 100) = 250. The standard deviation can be calculated as the square root of [(0.5 x (400-250)^2) + (0.5 x (100-250)^2)] = 129.1. Therefore, the coefficient of variation for Action A is 129.1/250 = 0.5164, which is equal to 51.64% or approximately 33.3% when expressed as a percentage.

The best choice(s) cannot be determined from the information given in the question. The decision depends on the individual's risk appetite and willingness to take a chance on a higher payoff with a higher degree of risk.

TABLE 19-2 The Following Payoff Matrix Is Given in Dollars