Asked by
Celine Rietdijk
on Dec 01, 2024
Verified
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.If it writes three of these policies,the mean annual profit for the company is found to be 3×150=4503 \times 150 = 4503×150=450 The standard deviation of the company's annual profit is found to be 60002+60002+60002≈$10,392.\sqrt { 6000 ^ { 2 } + 6000 ^ { 2 } + 6000 ^ { 2 } } \approx \$ 10,392 .60002+60002+60002≈$10,392. The calculation of the standard deviation requires the assumption that the policies are independent of one another.Which of the following examples describes a situation in which that assumption may be violated? A: The houses are close to each other and may all be affected by the same catastrophe such as earthquake,flooding,or fire.
B: The owners all bought their homes in the same year and may all be affected by a downturn in the market.
C: The owners of the three homes are related.
D: All three houses were bought for the same price.
A) B only
B) A,B,C,and D
C) A and C
D) A only
E) B and D
Independent of One Another
A concept where events or variables do not affect or influence each other.
Annual Profit
The financial gain, often calculated before taxes, that a business makes within one fiscal year.
Homeowner's Policy
An insurance policy that provides coverage for a homeowner against losses or damages to their home and belongings inside it.
- Examine the effects of independence among statistical variables and the impact of dependence on results.
- Examine with scrutiny the foundational assumptions behind statistical analyses and their resultant effects.
Verified Answer
AL
Learning Objectives
- Examine the effects of independence among statistical variables and the impact of dependence on results.
- Examine with scrutiny the foundational assumptions behind statistical analyses and their resultant effects.