Question

A recent study shows that the annual cost of maintaining a building in Accra averages200 Cedis with a variance of 260 Cedis. If a tax of 30% is introduced on all itemsassociated with the maintenance of building i.e. everything is made 30% more expensive.Calculate the standard deviation of the annual cost of maintaining a building in Accra

Answer 1

$Var(aX)=a^2Var(X)$

So, $Var(1.3X)=1.69Var(X)=1.69*260=439.4.$

Standard deviation$=\sqrt{439.4}=20.96.$