CFA Practice Question

There are 410 practice questions for this study session.

CFA Practice Question

If a constant was to be added to a set of scores, the standard deviation would ______.
A. remain the same
B. increase by the square root of that constant
C. increase by the magnitude of that constant

User Contributed Comments 5

User Comment
tenny45 if you review the notes you'll see that it mentions when a constant is added to standard deviation, st. dev stays the same; however, if the set of data is multiplied by a constant, then the st. dev also changes.
ksnider can someone expand on why this is the case?
Flavorman Use a numerical example and you will see that.
Flavorman if we have:
data 1,2,3 (here mean is 2)
stdev=sqrt((1-2)^2+(2-2)^2+(3-2)^2)/(3-1)=sqrt(2)/2
Now if we add 1 to the data set above a we have the ff new data set 2,3,4 (here mean is 3)
stdev=sqrt((2-3)^2+(3-3)^2+(4-3)^2)/2=sqrt(2)/2
mlaique Thank you Flavorman. I took it as the new data would have been: 1,2,3 and 4.
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