Over a five-year period, Insurance Company X provides coverage for 80,000 homes, while Insurance Company Y covers only 40,000 homes. In both cases, 1 percent of the homeowners file claims (resulting in claim frequency of company X of 800 and of company Y of 400). If the variance for Company X is .4 while the variance for Company Y is .1, use the coefficient of variation to determine which insurer faces the greatest risk and by how much: a. Insurer Y has a 50 percent greater risk than insurer X b. Insurer Y has a 25 percent greater risk than insurer X c. Insurer X has a 25 percent greater risk than insurer Y d. Insurer X has a 50 percent greater risk than insurer Y e. The two insurers have the same level of risk

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Finance
Over a five-year period, Insurance Company X
provides coverage for 80,000 homes, while
Insurance Company Y covers only 40,000
homes. In both cases, 1 percent of the
homeowners file claims (resulting in claim
frequency of company X of 800 and of
company Y of 400). If the variance for
Company X is .4 while the variance for
Company Y is .1, use the coefficient of
variation to determine which insurer faces the
greatest risk and by how much:
a. Insurer Y has a 50 percent greater risk than
insurer X
b. Insurer Y has a 25 percent greater risk than
insurer X
c. Insurer X has a 25 percent greater risk than
insurer Y
d. Insurer X has a 50 percent greater risk than
insurer Y
e. The two insurers have the same level of risk
Transcribed Image Text:Finance Over a five-year period, Insurance Company X provides coverage for 80,000 homes, while Insurance Company Y covers only 40,000 homes. In both cases, 1 percent of the homeowners file claims (resulting in claim frequency of company X of 800 and of company Y of 400). If the variance for Company X is .4 while the variance for Company Y is .1, use the coefficient of variation to determine which insurer faces the greatest risk and by how much: a. Insurer Y has a 50 percent greater risk than insurer X b. Insurer Y has a 25 percent greater risk than insurer X c. Insurer X has a 25 percent greater risk than insurer Y d. Insurer X has a 50 percent greater risk than insurer Y e. The two insurers have the same level of risk
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