An insurance company estimates that it should make an annual profit of $150 on each homeowners policy

Question:

An insurance company estimates that it should make an annual profit of $150 on each homeowner’s policy written, with a standard deviation of $6000.

a) Why is the standard deviation so large?

b) If the company writes only two of these policies, what are the mean and standard deviation of the annual profit?

c) If the company writes 1000 of these policies, what are the mean and standard deviation of the annual profit?

d) What circumstances could violate the assumption of independence of the policies?

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Related Book For answer-question

Business Statistics

ISBN: 9780133899122

3rd Canadian Edition

Authors: Norean D. Sharpe, Richard D. De Veaux, Paul F. Velleman, David Wright

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Question Posted: Jun 25, 2019 09:02 AM

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An insurance company estimates that it should make an annual profit of $150 on each homeowners policy

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a The standard deviation is large because the profits on insurance are highly variable Altho...View the full answer

Business Statistics

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