Question

Mr. Jones is about to purchase a business. There are two businesses available. The first has a daily expected profit of \(\displaystyle 150\) dollars with standard deviation \(\displaystyle 30\) dollars, and the second has a daily expected profit of \(\displaystyle 150\) dollars with standard deviation \(\displaystyle 55\) dollars. If Mr. Jones is interested in business with a steady income, which should he choose? When anyone look at the values of money, they will choose the higher money. It is a human thing. I am sure that the person who made this question put a trick that \(\displaystyle 150\) and \(\displaystyle 55\) dollars will not produce a steady income. But why?

Answer 1

george357 said: The standard deviation is a way to measure the variation. For example, suppose we have a set of values of that variation. The higher the standard deviation, the further will be these values are spread out from the mean. To understand the idea visually, imagine that you have a standard normal distribution where the mean, zero, divides the distribution area equally. Now approximately 34.1% of the area will lie within a width equal to 1 standard deviation from one side of the mean. Click to expand... I felt like you copied and pasted that from somewhere. Do you understand what it is saying? For a "steadier" income, would you pick the lower or the higher standard deviation? Why?

Answer 2

SupremeCookie said: I'm going to ask you a second time. What do you know about standard deviation? What does it tell you? It's a matter of recalling the definition. I wish that you would put the same effort into trying to answer my question, rather than spending your time writing the rubbish responses. I can say that with absolute certainty, i.e. a standard deviation of 0, that is the wisest way to spend your time. Click to expand... The standard deviation is a way to measure the variation. For example, suppose we have a set of values of that variation. The higher the standard deviation, the further will be these values are spread out from the mean. To understand the idea visually, imagine that you have a standard normal distribution where the mean, zero, divides the distribution area equally. Now approximately 34.1% of the area will lie within a width equal to 1 standard deviation from one side of the mean.

Answer 3

SupremeCookie said: I wish that you would put the same effort into trying to answer my question, rather than spending your time writing the rubbish responses. I can say that with absolute certainty, i.e. a standard deviation of 0, that is the wisest way to spend your time. Click to expand... @george: I agree with SupremeCookie completely. I don't mind the banter but if you are going to ask a question here you have to put the work in and take it seriously. You have been asked what you know about standard deviation. Please answer the question or go home. -Dan

Answer 4

george357 said: I am confused that Mr. Jones should choose the profit with the lower standard deviation. I don't see the reason. Click to expand... I'm going to ask you a second time. What do you know about standard deviation? What does it tell you? It's a matter of recalling the definition. I wish that you would put the same effort into trying to answer my question, rather than spending your time writing the rubbish responses. I can say that with absolute certainty, i.e. a standard deviation of 0, that is the wisest way to spend your time.

Answer 5

Jomo said: How can you possible know how to answer this question without knowing what standard deviation is? Either way the business profits by an average of $150/pay. Click to expand... I am confused that Mr. Jones should choose the profit with the lower standard deviation. I don't see the reason.

Answer 6

How can you possible know how to answer this question without knowing what standard deviation is? Either way the business profits by an average of $150/pay.

Answer 7

george357 said: Mr. Jones is about to purchase a business. There are two businesses available. The first has a daily expected profit of \(\displaystyle 150\) dollars with standard deviation \(\displaystyle 30\) dollars, and the second has a daily expected profit of \(\displaystyle 150\) dollars with standard deviation \(\displaystyle 55\) dollars. If Mr. Jones is interested in business with a steady income, which should he choose? When anyone look at the values of money, they will choose the higher money. It is a human thing. I am sure that the person who made this question put a trick that \(\displaystyle 150\) and \(\displaystyle 55\) dollars will not produce a steady income. But why? Click to expand... Or perhaps this involves a topic that you are currently covering? C'mon! -Dan

Answer 8

george357 said: I am sure that the person who made this question put a trick that \(\displaystyle 150\) and \(\displaystyle 55\) dollars will not produce a steady income. But why? Click to expand... What??????

Answer 9

What do you know about standard deviation?