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23 June, 04:26

If an insurance company has 10000 policies, and each has 0.1 probability of making a claim, what is the standard deviation of the fraction of policies which result in a claim?

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Answers (2)
  1. 23 June, 06:28
    0
    0.003

    Step-by-step explanation:

    Since each of the policy have the same chance of success, then it follows a binomial distribution (only two outcome; success or failure).

    α = √ (p (1-p) / n) = √ (0.1 (1-0.1) / 10000) = √ 0.000009 = 0.003

    where p = 0.1, α = standard deviation.
  2. 23 June, 06:35
    0
    Answer: S. D = + / - 0.003

    The standard deviation of the fraction of policies which result in a claim is + / - 0.003

    Step-by-step explanation:

    Given;

    Probability of making a claim p = 0.1

    Number of company policies n = 10000

    Standard deviation is the measure of how spread out numbers are.

    S. D = √ (p (1-p) / n)

    Where,

    p = 0.1

    n = 10000

    S. D = √ (0.1 (1-0.1) / 10000)

    S. D = √ (0.1*0.9/10000)

    S. D = √ (0.000009)

    S. D = + / - 0.003
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