Question

65. More on insurance An insurance company claims 7 that in the entire population of homeowners, the mea annual loss from fire is μ-5250 and the standard deviation of the loss is σ 5000, The distribution of fosses is strongly right-sken ed:用ant pdilcies have S0 loss, but a few have large losses. The company hopes to sell 1000 of these policies for $300 each

Answer 1

for sample size n=1000; std error of mean =std deviation/sqrt(n)=5000/sqrt(1000)=158.114

for 90th percentile ; critical value of z =1.28

therefore corresponding value of amount charged =mean+*std deviation

=250+1.28*158.114=$452.39