A car insurance company has n = 1600 policy holders. The expected claim paid to a policy holder during a year is μ = $1000 with a standard deviation of o= $700. What premium should the company charge each policy holder to assure that with probability p = 0.9, the premium will cover the cost of the claims? Compute the answer using the Central Limit Theorem.

Calculus For The Life Sciences
2nd Edition
ISBN:9780321964038
Author:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Publisher:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Chapter13: Probability And Calculus
Section13.CR: Chapter 13 Review
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A car insurance company has n = 1600 policy holders. The expected claim paid to a
policy holder during a year is μ = $1000 with a standard deviation of o= $700. What
premium should the company charge each policy holder to assure that with probability
p = 0.9, the premium will cover the cost of the claims? Compute the answer using the
Central Limit Theorem.
Transcribed Image Text:A car insurance company has n = 1600 policy holders. The expected claim paid to a policy holder during a year is μ = $1000 with a standard deviation of o= $700. What premium should the company charge each policy holder to assure that with probability p = 0.9, the premium will cover the cost of the claims? Compute the answer using the Central Limit Theorem.
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