An Insurance Company Estimates That It Should Make an Annual $3 \times 150 = 450$

question 182

Multiple Choice

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 $3 \times 150 = 450$ The standard deviation of the company's annual profit is found to be $\sqrt { 6000 ^ { 2 } + 6000 ^ { 2 } + 6000 ^ { 2 } } \approx \$ 10,392 .$ 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

Identify feasible solutions for given constraints in linear programming problems.

Understand the significance of shadow prices or dual values in linear programming.

Formulate linear programming constraints based on problem statements.

Apply sensitivity analysis to assess the impact of parameter changes on the solution of linear programming problems.

---

Definitions:

Excess Reserve

Funds that banks hold over and above the required minimum reserves mandated by central banking authorities.

Money Supply

The aggregate of all money, such as cash, deposits in banks, and liquid assets, that is present within an economy at a certain point in time.

Real GDP

Gross Domestic Product (GDP) adjusted for inflation, measuring the value of goods and services produced by a country in a year, expressed in real terms.

Average Price Level

The average price level refers to the general level of prices for goods and services in an economy over a given period, often used as an indicator of inflation.