DSE 2006 Q34

[Mauli]

http://economicsentrance.weebly.com/uploads/1/1/0/5/1105777/24_june_2006_option_a.pdf

CAN SOMEONE PLEASE HELP ME WITH THIS QUESTION.?

[Sumit]

@Mauli: You can answer this question by simple logic....the question is saying that the 'twice the difference btw these two observations...which simply means double variance coz the observations in new distribution will be scattered around their mean double the old distribution....i.e the new distribution curve will be flatter(which  only means higher variance).

[Mauli]

thanks sumit:)
that was quite an intuitive way to answer.
but, what if in the options we have two no.s indicating higher variance?

[Kuldeep]

Var [2(x1-x2)]= 4var(x1-x2)=var (x) + var(y) + 2 cov (xy)
Cov x,y = 0..... Solve the above you would get Var [(x1-x2)]=128

[Mauli]

thankyou kuldeep:)

[TheFlash]

Why is Cov zero? There isn't any information regarding independence.