The median annual cost of auto insurance is $ 939 (According to DACO). Suppose the standard deviation is o = $ 241. What is the probability that in a simple random sample of auto insurance policies the sample mean differs more than $ 70.42 from the population mean if the sample size is 45? You must calculate the probability that the difference between the average cost in the sample and the average annual cost do not differ by $ 70.42. Find the probability that P (\ µ - š | 0) = P (-70.42 H-iS 70.42) Select one: a. The probability is 99% that the auto policy will not differ by $ 70.42 from the average annual cost. b. The probability is 50% that the auto policy will not differ by $ 70.42 from the average annual cost. c. The probability is 80% that the auto policy will not differ by $ 70.42 from the average annual cost. d. The probability is 70% that the auto policy will not differ by $ 70.42 from the average annual cost. e. The probability is 95% that the auto policy will not differ by $ 70.42 from the average annual cost.
Continuous Probability Distributions
Probability distributions are of two types, which are continuous probability distributions and discrete probability distributions. A continuous probability distribution contains an infinite number of values. For example, if time is infinite: you could count from 0 to a trillion seconds, billion seconds, so on indefinitely. A discrete probability distribution consists of only a countable set of possible values.
Normal Distribution
Suppose we had to design a bathroom weighing scale, how would we decide what should be the range of the weighing machine? Would we take the highest recorded human weight in history and use that as the upper limit for our weighing scale? This may not be a great idea as the sensitivity of the scale would get reduced if the range is too large. At the same time, if we keep the upper limit too low, it may not be usable for a large percentage of the population!
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Select one:
a. The probability is 99% that the auto policy will not differ by $ 70.42 from the average annual cost.
b. The probability is 50% that the auto policy will not differ by $ 70.42 from the average annual cost.
c. The probability is 80% that the auto policy will not differ by $ 70.42 from the average annual cost.
d. The probability is 70% that the auto policy will not differ by $ 70.42 from the average annual cost.
e. The probability is 95% that the auto policy will not differ by $ 70.42 from the average annual cost.
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