90.2018 140.30 90 b. DPP5090–401,600.101607090–20 400.401609090 0 0.20 014090+502,500.3075010704.Coefficient of variation (LO1) Shack Homebuilders, Limited, is evaluating a new promotional campaign that could increase home sales. Possible outcomes and probabilities of the outcomes are shown below. Compute the coefficient of variation. Possible OutcomesAdditional Sales in UnitsProbabilitiesIneffective campaign40.20Normal response60.50Extremely effective140.30- Solution:
Shack Homebuilders, Limited Coefficient of variation (V) = standard deviation/expected value. D PDP 40.20 8 60.5030 140.30 80= D PP 4080–401,600.20 320 6080–20 400.50 200 14080+603,600.301,0801,6005.Coefficient of variation (LO1) Sam Sung is evaluating a new advertising program that could increase electronics sales. Possible outcomes and probabilities of the outcomes are shown below. Compute the coefficient of variation. Possible OutcomesAdditional Sales in UnitsProbabilitiesIneffective campaign 80.20Normal response124.50Extremely effective340.3013-5.Solution:Sam Sung Coefficient of variation (V) = standard deviation/expected value. D P DP 80.20 16 124.50 62 340.30 180 = DPP80180–10010,000.202,000124180 –56 3,136.501,568340180+16025,600.307,680 11,2486.Coefficient of variation (LO1) Possible outcomes for three investment alternatives and their probabilities of occurrence are given below. Alternative 1Outcomes Probability Alternative 2Outcomes Probability Alternative 3Outcomes Probability Failure 50.2 90.3 80.4Acceptable 80.4160.5200.5Successful120.4200.2400.1Rank the three alternatives in terms of risk from lowest to highest (compute the coefficient of variation). 13-6.Solution:Alternative 1Alternative 2Alternative 3D × P = DP D × P = PD × P = DP$50 0.2$10 $90 0.3$27 $80 0.4$32 800.4321600.5802000.51001200.4482000.2404000.140= $90= $147= $172Standard Deviation Alternative 1 360$720Alternative 2 $ 90$147$–57$3,249.3$ 974.70160 147 +13 169.5 84.50200 147 +53 2,809.2 561.80$1,621.00Alternative 3 $ 80$172$–92$ 8,464.4$3,385.60 200 172+28 784.5 392.00 400 172+228 51,984.1 5,198.40$8,976.00Rank by Coefficient of Variation Coefficient of variation (V) = standard deviation/expected value
Alternative 2 Alternative 1 Alternative 3 7.Coefficient of variation (LO1) Five investment alternatives have the following returns and standard deviations of returns. AlternativesReturns: Expected ValueStandardDeviation A $ 1,200 $ 300B 800 600C 5,000 450D 1,000 430E 60,00013,200Using the coefficient of variation, rank the five alternatives from the lowest risk to the highest risk. |

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