Question: At fault. The car insurance company in Exercise believes that about 0.5% of drivers have an at-fault accident during a given year. Suppose the company insures 1355 drivers in that city.
a) What are the mean and standard deviation of the number who may have at-fault accidents?
b) Can you describe the distribution of these accidents with a Normal model? Explain.
Exercise: Deductible. A car owner may buy insurance that will pay the full price of repairing the car after an at-fault accident, or save $12 a year by getting a policy with a $500 deductible. Her insurance company says that about 0.5% of drivers in her area have an at-fault auto accident during any given year. Based on this information, should she buy the policy with the deductible or not? How does the value of her car influence this decision?