Chapter 7: Problem 15 Previous Problem Problem ListNext Problem insurer has foun

Question

Chapter 7: Problem 15 Previous Problem Problem ListNext Problem insurer has found that repair claims are Normally distributed with a mean of $800 and a standard deviation of $760 (a) Find the probability that a single claim, chosen at random, will be less than $750 ANSWER (b) Now suppose that the next 90 claims can be regarded as a random sample f the average of the 90 claims is smaller than $750 ANSWER from the long-run claims process. Find the probability that (c) If a sample larger than 90 claims is considered, there would be 11 chance of getting a sample with an average or "AN EQUAL" without the quotes) Note: You can eam partial credit on this problem. You have rch 78/ 11/30/2017 lp

Explanation / Answer

a) P(X < 750) = P(Z < (750-800)/760) = P(Z < -0.07) = 0.4721

b) Formula: Z = (X_bar - Mean)/(SD/sqrt(N))

b) P(X_bar < 750) = P(Z < (750-800)/(760/sqrt(90)) = P(Z < -0.62) = 0.2743

c) For larger sample size, the standard error decreases and therfore negative Z value will be lower.

Answer: Less chance

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