Question

Bruce buys a pet insurance policy that covers vet visits, having a deductible of 300. Costs for visiting the vet can be modeled by a uniform random variable on the interval (0, 2000). Determine the standard deviation of the insurance payment on this policy, taking into account zero payments. ADAPT

Answer 1

Answer: standard deviation = 577

Explanation:

The insurance payment of the policy is deduced by x.

The formula for determining the theoretical standard deviation is expressed as

Standard deviation = √(b - a)²/12

Where

a represents the lowest value of x

b represents the highest value of x

From the given information,

a = 0

b = 2000

Therefore,

Standard deviation = √(200 - 0)²/12

= √(4000000/12)

= √333333.3333333333

= 577.35

Approximately 577