Revision as of 14:47, 6 May 2023 by Admin (Created page with "An industrial company provides health insurance to employees located at four different plants. Health insurance costs at each plant are independent of the costs at any other p...")
ABy Admin
May 06'23
Exercise
An industrial company provides health insurance to employees located at four different plants. Health insurance costs at each plant are independent of the costs at any other plant. Plant managers have calculated the following statistics:
| Plant | Average cost | Standard deviation |
|---|---|---|
| W | 2 | 1.0 |
| X | 2 | 1.0 |
| Y | 5 | 1.5 |
| Z | 7 | 2.0 |
Calculate the standard deviation of total company health insurance costs.
- 1.4
- 2.1
- 2.9
- 5.5
- 6.3
Copyright 2023. The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.
ABy Admin
May 06'23
Solution: C
The variance of the total is the sum of the variances: 1 + 1 + 2.25 + 4 = 8.25. The standard deviation is the square root, 2.87.
Copyright 2023. The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.