Question

[Red Cross Red Shield] The distribution of the amount paid in health claims by Red Cross Red Shield (RCRS), a medical insurance company, on individual health insurance plans for college students has mean $500, median $400, and standard deviation $550.

Based on this information alone, can you determine the exact probability that the annual amount paid in claims to a single randomly chosen participant is greater than $800?

a.	P(More than $800) = 0.425
	b.	P(More than $800) = 0.5
	c.	P(More than $800) = 0.275
	d.	Since we do not know the exact distribution, we cannot determine the probability that the annual amount paid in claims to a single randomly chosen participant is greater than $800 with mean and standard deviation alone.

Answer 1

Option D is making sense. Generally we assume normal distribution if nothing is mentioned. But the fact that median is also given, and its value is much different from the mean indicates that distribution cannot be normal (A normal distribution has median equal to mean)

So without the exact distribution, we cannot ascertain the  probability that the annual amount paid in claims to a single randomly chosen participant is greater than $800. There are a million ways to distribute the probabilities with mean $500, median $400, and standard deviation $550

answered by: anonymous