A home insurance company anticipates the following pattern of claims, based on h

Question

A home insurance company anticipates the following pattern of claims, based on historical data. What is the standard deviation of claims?

Type of Claim

Size of Claim

Number of Claims out of 10,000 Policy Holders

Probability

1

$200,000

1

0.0001

2

$50,000

10

0.001

3

$2,000

200

0.02

4

$0

9,789

0.9789

A) $2,562.79 B) $6,567,900 C) $2,000
D) $110

E) $3,753.52

Type of Claim

Size of Claim

Number of Claims out of 10,000 Policy Holders

Probability

1

$200,000

1

0.0001

2

$50,000

10

0.001

3

$2,000

200

0.02

4

$0

9,789

0.9789

Explanation / Answer

Solution.

D) $110

Type of Claim Size of Claim Number of Claims out of 10,000 Policy Holders Probability 1         200,000.00                         1 0.0001              20.00 2            50,000.00                       10 0.001              50.00 3              2,000.00                    200 0.02              40.00 4                           -                   9,789 0.9789                     -   Standard deviation            110.00

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