- CFA Exams
- CFA Exam: Level I 2021
- Study Session 2. Quantitative Methods (1)
- Reading 7. Statistical Concepts and Market Returns
- Subject 6. Measures of Dispersion

###
**CFA Practice Question**

Two suppliers offer a machine part with the 1" diameter required by a manufacturer. Samples indicate that supplier A's product has a standard deviation of 0.12 in and supplier B's product has a standard deviation of 0.15 in. Which of the following statements is true?

B. The standard deviation has no relationship to the quality of the product.

C. Only the mean is important in buying the machine part.

A. A offers a more homogeneous product.

B. The standard deviation has no relationship to the quality of the product.

C. Only the mean is important in buying the machine part.

Correct Answer: A

###
**User Contributed Comments**
5

User |
Comment |
---|---|

surob |
In this case, "homogeneous" means the product with less mistakes, w/lower dispersion from the mean diameter. |

amamed213 |
Can someone explain more ? |

padre40 |
less variation between the two similar products (CV formula) |

Saxonomy |
Basically means when they studied (for example) 100 parts that Supplier A and Supplier B each sold, neither of the two Suppliers produced 100 parts with exactly the same diameter (though they were close). However, supplier A's supplied part (overall) were closer to the actual 1" than Supplier B. Lower standard deviation means lower instances of error/mistake. |

jonan615 |
@surob, "homegeneous" in this instance isn't referring to mistakes. It is referring to tolerances, the permissible limit or limits in variance that engineers measure to prevent or ensure a machine performs as intended. |