An insurance company estimates that it should make an annual profit of $150 on each homeowner's policy written,with a standard deviation of $6000.If it writes three of these policies,the mean annual profit for the company is found to be 3 × 150 = 450.The standard deviation of the company's annual profit is found to be
≈ $10,392.
The calculation of the standard deviation requires the assumption that the policies are independent of one another.Which of the following examples describes a situation in which that assumption may be violated?
A: The houses are close to each other and may all be affected by the same catastrophe such as earthquake,flooding,or fire.
B: The owners all bought their homes in the same year and may all be affected by a downturn in the market
C: The owners of the three homes are related
D: All three houses were bought for the same price
A)B only
B)A,B,C,and D
C)A and C
D)A only
E)B and D

Question

An insurance company estimates that it should make an annual profit of $150 on each homeowner's policy written,with a standard deviation of $6000.If it writes three of these policies,the mean annual profit for the company is found to be 3 × 150 = 450.The standard deviation of the company's annual profit is found to be 
≈ $10,392.
The calculation of the standard deviation requires the assumption that the policies are independent of one another.Which of the following examples describes a situation in which that assumption may be violated?
A: The houses are close to each other and may all be affected by the same catastrophe such as earthquake,flooding,or fire.
B: The owners all bought their homes in the same year and may all be affected by a downturn in the market
C: The owners of the three homes are related
D: All three houses were bought for the same price
A)B only 
B)A,B,C,and D 
C)A and C 
D)A only 
E)B and D

Quizplus · Accepted Answer

The Answer of An insurance company estimates that it should make an annual profit of $150 on each homeowner's policy written,with a standard deviation of $6000.If it writes three of these policies,the mean annual profit for the company is found to be 3 × 150 = 450.The standard deviation of the company's annual profit is found to be 
≈ $10,392.
The calculation of the standard deviation requires the assumption that the policies are independent of one another.Which of the following examples describes a situation in which that assumption may be violated?
A: The houses are close to each other and may all be affected by the same catastrophe such as earthquake,flooding,or fire.
B: The owners all bought their homes in the same year and may all be affected by a downturn in the market
C: The owners of the three homes are related
D: All three houses were bought for the same price
A)B only 
B)A,B,C,and D 
C)A and C 
D)A only 
E)B and D

An Insurance Company Estimates That It Should Make an Annual