An Automobile Insurance Company on Average Charges a Premium That

question 22

Multiple Choice

An automobile insurance company on average charges a premium that:

• A) equals the expected loss from each driver.
• B) is less than the expected loss from each driver.
• C) is greater than the expected loss from each driver.
• D) equals 1/(expected loss) of each driver.

---

Definitions:

Significance Level

A predetermined threshold for determining statistical significance in hypothesis testing, typically set at 0.05, which represents the risk of committing a Type I error.

T-statistic

A ratio of the departure of an estimated parameter from its notional value and its standard error.

Directional Hypothesis

A hypothesis that specifies the direction of the expected difference or relationship between variables.

Null Hypothesis

A default statement that indicates no effect or no difference, used as a starting point for statistical hypothesis testing.