Question

Your insurance company has converage for three types of cars. The annual cost for each type of car can be modeled using Gaussian (Normal) distribution, with the following parameters:

- Car Type 1: Mean=$520 and Standard Deviation=$110
- Car Type 2: Mean=$720 and Standard Deviation=$170
- Car Type 3: Mean=$470 and Standard Deviation=$80

Use the Random number generator and simulate 1000-long columns, for each of the three cases. Example: for the Car Type 1, use Number of variables=1, Number of random numbers=1000, Distribution=Normal, Mean=520 and Standard deviation=110, and leave random Seed empty.

Next, use either sorting to construct the appropriate histogram or rule of thumb to answer the questions:

**13. What is approximate probability that Car Type 1 has
an annual cost less than $350?**

- a. Between 1% and 3%
- b. Between 3% and 9%
- c. Between 10% and 15%
- d. None of these

**14. Which of the three types of cars is least likely to
cost less than $350?**

- a. Type 1
- b. Type 2
- c. Type 3

**15. For which of the three types we expect that
(approximately) 95% of cases will be between $300 and
$740?**

- a. Type 1
- b. Type 2
- c. Type 3

Answer #1

**Answer:**

**13. What is approximate probability that Car Type 1 has
an annual cost less than $350?**

The following information has been provided:

We need to compute. The corresponding z-value needed to be computed:

Therefore,

**b. Between 3% and 9%**

**14. Which of the three types of cars is least likely to
cost less than $350?**

The car with maximum mean and standard deviation is least likely to cost less than $350

**The correct answer is type 2**

**15. For which of the three types we expect that
(approximately) 95% of cases will be between $300 and
$740?**

Simplest way to check is to obtain the middle value of the interval, the car with middle value of the interval = mean will be the answer

( 300 + 740 )/2= 1140/2 = 520

**a. Type 1**

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Your insurance company has converged for three types of cars.
The annual cost for each type of cars can be modeled using Gaussian
(Normal) distribution, with the following parameters: (Discussions
allowed!)
Car type 1 Mean=$520 and Standard Deviation=$110
Car type 2 Mean=$720 and Standard Deviation=$170
Car type 3 Mean=$470 and Standard Deviation=$80
Use Random number generator and simulate 1000 long columns, for
each of the three cases. Example: for the Car type 1, use Number of
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