An insurance company estimates that it should make an annual profit of $ 150 on each homeowner's
Question:
a) Why is the standard deviation so large?
b) If it writes only two of these policies, what are the mean and standard deviation of the annual profit?
c) If it writes 10,000 of these policies, what are the mean and standard deviation of the annual profit?
d) Is the company likely to be profitable? Explain.
e) What assumptions underlie your analysis? Can you think of circumstances under which those assumptions might be violated? Explain.
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a The standard deviation is large because the profits on insurance are highly variable Although ther...View the full answer
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Related Book For
Stats Data and Models
ISBN: 978-0321986498
4th edition
Authors: Richard D. De Veaux, Paul D. Velleman, David E. Bock
Question Posted:
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