5. We assume 4 people having same distribution. The pooling arrangement between 4 people is given as following Loss = Outcome $10,000 $7,500 $5,000 $2,500 $0 Probability 0.000006 0.000475 0.014 0.171 0.815 a. Calculate the Expected value b. Calculate variance and Standard deviation c. Compare your results to those of question 3 and 4 (e). Interpret your results Suceste mapace of mign inviduais since I Will or set against the reduced risk from low risk individuals. 2. Calculate the expected value Expected value Sun of (outcome probability) = (- 10,000 *0,05) + (0 * 0.95) =(- 500) + (0) - 500 3. Calculate the variance and Standard deviation The formula for variance is Variance - sum of (Ri - ) 2 Pi 4512500+ 237500 = 4750000 Standard deviation 13 square root of variance Standard deviation art (4750000) 21794495 4. We assume a new distribution of costs (Pooling with people) Loss to Outcomes Probability outcomes PX (X-X') P[X-X)^2 Neither 0 dollars 0.00 0.00 -7500 0.00 0.00 0.25 Ann 5000 1250 -2500 1562500 5,000 5,000 10,000 5000 1250 -2500 Bob Both 1562500 0.25 0.50 10000 5000 2500 3125000 a Complete the table above The answer is in the table above b. Calculate the expected value =Sum of (PX of Neither PX of Both) =Sum of (0* 5000) = 7500.00 c. Calculate Variance and Standard deviation Vanance -Sum of (PFOX-2002 of Neither * P*X-X)^2 of Bob) = Sum of (0" 1562500) =3125000 SD - SORI (variance) SQRT (8125000) 0227 d. Compare between results of question 3. Interpret