Table 54 Job Outcome 1 Deviation Outcome 2 Deviation 40 20Y5

Table 5.4 Job Outcome 1 Deviation Outcome 2 Deviation $40 $20Y$50 $60 Refer to Table 5.4. If outcomes 1 and 2 are equally likely at Job A, and if at Job B the $20 outcome occurs with probability 0.1, and the $50 outcome occurs with probability 0.9, then O A. Job A is safer because the difference in the probabilities is lower OB. Job B is riskier because the difference in the probabilities is higher O c. Job A is riskier because the standard deviation is higher Job A is riskier only because the expected value is lower There is no definite way given this information to tell how risky the two jobs are. D. 0 E.

Solution

The risk is always associated with the standard deviation. Hence, a job will be riskier only if the standard deviation will be higher. The standard deviation of job A comes up to be 10 while the standard deviation of job B comes up to be 9. Since the standard deviation of Job A is higher, job A is riskier. Hence the correct answer is (C).