What is the approximate probability that the average loss

Assignment Help Basic Statistics
Reference no: EM132404124

The idea of insurance is that we all face risks that are unlikely but carry high cost. Think of a fire destroying your home. So we form a group to share the risk: we all pay a small amount, and the insurance policy pays a large amount to those few of us whose homes burn down. An insurance company looks at the records for millions of homeowners and sees that the mean loss from fire in a year is μ = $500 per house and that the standard deviation of the loss is σ = $10,000. (The distribution of losses is extremely right-skewed: most people have $0 loss, but a few have large losses.) The company plans to sell fire insurance for $500 plus enough to cover its costs and profit.

Explain clearly why it would be unwise to sell only 100 policies. Then explain why selling many thousands of such policies is a safe business.

Suppose the company sells the policies for $600. If the company sells 50,000 policies, what is the approximate probability that the average loss in a year will be greater than $600?

Reference no: EM132404124

Questions Cloud

System modelling - modelling diagrams assignment : Draw use case, Domain model, System Sequence modelling diagrams for the given case study, justify the choose of modeling tools, and explain the conclusions
Represent the proportion of all actors who are extroverts : Let p represent the proportion of all actors who are extroverts. Find a point estimate for p. (Round your answer to four decimal places.)
Problem regarding the phstat solution : The population mean waiting time to check out of a supermarket has been 4 minutes. Recently, in an effort to reduce the waiting time
Determining the mean of the total income : (a) Is it reasonable to take the mean of the total income X + Y to be µX + µY? Explain your answer.
What is the approximate probability that the average loss : Suppose the company sells the policies for $600. If the company sells 50,000 policies, what is the approximate probability that the average loss
What are the null hypothesis and alternative hypothesis : What are the null hypothesis and alternative hypothesis here? Assuming confidence level of 95%, determine the alpha and critical value.
What are the null hypothesis and alternative hypothesis here : 1) What are the null hypothesis and alternative hypothesis here? 2) Assuming confidence level of 95%, determine the alpha and critical value.
Chance that between 35 percent and 45 percent : Estimate the chance that between 35 percent and 45 percent of the households in the sample are single parent households?
Distribution of the mean mpg for the? sample : a. What is the distribution of the mean mpg for the? sample? b. What is the probability that the mean mpg of the sample will be greater than 39 mpg?

Reviews

Write a Review

Basic Statistics Questions & Answers

  A poll found that 41 of male voters and 44female voters

a poll found that 41 of male voters and 44female voters support a particular candidate.too test whether this candidate

  What are her risk odds for a deal

Risk odds: Wendy adheres to the delta property and has risk odds of 2:1 for a deal where she could win or lose $100.

  Is the study descriptive or inferential

Based on a random sample of 2,500 people, the estimates of people by age group unemployed in one Northern city are found in the table. Is the study descriptive or inferential?

  Calculate the correlation coefficient

Using excel, calculate the correlation coefficient, r,  for the two variables.  How would you interpret this measure?

  Individual enrolls in the program

Years to Complete a Graduate Program: The average number of years a person takes to complete a graduate degree program is 3. The standard deviation is 4 months. Assume the variable is normally distributed. If an individual enrolls in the program, ..

  The mean of the 60 heights is 634 in and the mean of the 60

a sample of 60 women is obtained and their heights in inches and pulse rates in beats per minute are measured. the

  Heights of men on a baseball team bell-shaped distribution

heights of men on a baseball team bell-shaped distribution wit ha mean of 183 cm and a standard deviation of 6 cm.

  The sampling distribution of the mean

Assume the null hypothesis is that μ = 50 and that the graph shown below is the sampling distribution of the mean (M). Would a sample value of M= 60 be significant in a two-tailed test at the .05 level? Roughly what value of M would be needed to b..

  Probability of observing a sample mean

Find the probability of observing a sample mean of 0.985 liters or less in a sample of 70 bottles, if the beverage dispensing unit functions properly.

  What is the base rate for lung cancer in men over a lifetime

What is the base rate for lung cancer in men over a lifetime?- What is the approximate lifetime risk of getting lung cancer for men who smoke?

  Produced from a normal population with mean

A random sample size of 41 is produced from a normal population with mean u and a standardd deviation sigma = 1.

  Is the new formula more effective than the old

Four days following treatment, researchers count the number of fleas collected from each pet during a 2-minute period. The results are shown below. At the 0.025 level, is the new formula more effective than the old?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd