Question
If the standard deviation of a variable X is $\sigma,$ then the standard deviation of variable $\frac{\text{aX+b}}{\text{c}}$ is:
  1. $\text{a}\ \sigma$
  2. $\frac{\text{a}}{\text{c}}\sigma$
  3. $\Big|\frac{\text{a}}{\text{c}}\Big|\sigma$
  4. $\frac{\text{a}\sigma+\text{b}}{\text{c}}$

Answer

  1. $\Big|\frac{\text{a}}{\text{c}}\Big|\sigma$

Solution:

$\text{Y}=\frac{\text{aX+b}}{\text{c}}$

$\overline{\text{Y}}=\frac{\sum\text{y}_\text{i}}{\text{n}}=\frac{\frac{\text{a}\sum\text{X}+\text{nb}}{\text{c}}}{\text{n}}$

$=\frac{\text{a}\sum\text{X}}{\text{nc}}+\frac{\text{nb}}{\text{nc}}$

$=\frac{\text{a}\overline{\text{X}}}{\text{c}}+\frac{\text{b}}{\text{c}}$

$\text{Var}(\text{X})=\frac{\sum\big(\text{x}_\text{i}-\overline{\text{X}}\big)^2}{\text{n}}$

$=\sigma^2$

$\text{Var}(\text{Y})=\frac{\sum\big(\text{y}_\text{i}-\overline{\text{Y}}\big)^2}{\text{n}}$

$=\frac{\sum\Big(\frac{\text{aX}}{\text{c}}+\frac{\text{b}}{\text{c}}-\frac{\text{a}}{\text{c}}\overline{\text{X}}-\frac{\text{b}}{\text{c}}\Big)}{\text{n}}$

$=\frac{\sum\Big(\frac{\text{aX}}{\text{c}}-\frac{\text{a}}{\text{c}}\overline{\text{X}}\Big)^2}{\text{n}}$

$=\Big(\frac{\text{a}}{\text{c}}\Big)^2\frac{\sum\big(\text{x}_1-\overline{\text{X}}\big)^2}{\text{n}}$

$=\Big(\frac{\text{a}}{\text{c}}\Big)^2\sigma^2$

$\text{SD}(\sigma)=\sqrt{\Big(\frac{\text{a}}{\text{c}}\Big)^2\sigma^2}$

$=\Big|\frac{\text{a}}{\text{c}}\Big|\sigma$

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