Question

All answers were generated using 1,000 trials and native Excel functionality.)

Statewide Auto Insurance believes that for every trip longer than 10 minutes that a teenager drives, there is a 1 in 1,000 chance that the drive will results in an auto accident. Assume that the cost of an accident can be modeled with a beta distribution with an alpha parameter of 1.5, a beta parameter of 3, a minimum value of $500, and a maximum value of $20,000. Construct a simulation model to answer the following questions. (Hint: Review Appendix 11.1 for descriptions of various types of probability distributions to identify the appropriate way to model the number of accidents in 500 trips.)

(a)

If a teenager drives 500 trips longer than 10 minutes, what is the average cost resulting from accidents?

Round your answer to the nearest whole number.

Average Cost:

$

Provide a 95% confidence interval on this mean.

Round your answers to the nearest whole number.

Lower Bound:	$
Upper Bound:	$

(b)

If a teenager drives 500 trips longer than 10 minutes, what is the probability that the total cost from accidents will exceed $8,000?

Round your answer to a one decimal percentage.

Probability (Accident Cost > $8,000):

%

Provide a 95% confidence interval on this proportion.

Round your answers to a one decimal percentage.

Lower Bound:	%
Upper Bound:	%

Answer 1

Solution: