Question

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 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 annual cost less than $550?

a. Between 10% and 13%

b. Between 23% and 29%

c. Between 55% and 70%

d. None of these

14. Which of the three types of cars is most likely to cost more than $1000?

a. Type 1

b. Type 2

c. Type 3

15. For which of the three types we have the highest average cost?

a. Type 1

b. Type 2

c. Type 3

Answer 1

13. The probability that Car Type 1 has annual cost less than $550

c. Between 55% and 70%

14. For CAR TYPE 1

CAR TYPE 2

CAR TYPE 3

c. Type 2 is most likely to cost more than $1000

15.

b. Type 2