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NB: Work with at least 4 decimal places throughout your calculations Requirements 1. Calculate the variance of the Michelin tyre in decimal to 4 decimal
NB: Work with at least 4 decimal places throughout your calculations
Requirements
1. Calculate the variance of the Michelin tyre in decimal to 4 decimal places
2. Calculate the coefficient of variance for the Tornado tyre in decimal of 2 decimal places
3. Calculate the variance of the Tornado tyre in decimal to 4 decimal places
4. Calculate the coefficient of the variance for the Michelin tyre in decimal to 2 decimal places
Perfect tyres supply a newly formed locally owned company seeking to enter the motor accessory markets where it will supply two types of tyres namely: Michelin and Tornado. The demand for tyres will fluctuate depending on the state of the economy. It will employ 20 employees at its manufacturing plant performing different functions. The Managing Director recently attended an international conference on Risk Management. During the conference it was stated how the statistical concept of standard deviation can be used to measure risk. He has therefore contracted you as the management accountant with the aim of exploring how the use of standard deviation can help him make decisions pertaining to the risk profile of each tyre type. The following probability distribution has been provided by the managing director based on his industry experience: Probability (%) Economic state Super boom Boom 30 45 Recession 25 The estimated return for the Michelin tyre is 15% during super boom, 25% in a boom economy and -10% in a recession. The tomado tyre has an estimated return of 20% in a super boom economy, 10% in a boom economy and -15% during recession. To ensure that the above probability distribution is as close as accurate or perfect, the managing director is thinking of hiring a market specialist to provide further information on the market of tyres. The market specialist will charge 2% higher compared to the cost incurred by Perfect Tyres to obtain the current projection Required: Calculate the variance of the Michelin tyre in decimal to 4 decimal placesStep by Step Solution
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