Question

(All answers were generated using 1,000 trials and native Excel functionality.) Statewide Auto Insurance believes that for every trip longer than 10 minutes that a teenager drives, there is a 1 in 1,000 chance that the drive will results in an auto accident. Assume that the cost of an accident can be modeled with a beta distribution with an alpha parameter of 1.5, a beta parameter of 3, a minimum value of $500, and a maximum value of $20,000. Construct a simulation model to answer the following questions. (Hint: Review Appendix 11.1 for descriptions of various types of probability distributions to identify the appropriate way to model the number of accidents in 500 trips.) (a) If a teenager drives 500 trips longer than 10 minutes, what is the average cost resulting from accidents? Round your answer to the nearest whole number Average Cost: $ 4555.5 Provide a 95% confidence interval on this mean Round your answers to the nearest whole number Lower Bound: -14,55 Upper Bound: $ +23,66

Answer 1

in an auto acecle longer that lo minutes thdaheenageケdRa Qooo D) Scanned wit CS

mf cients The cost of an accident Ttal Cost ( 1 Trial # 2 1 3 A2+1 4 A3+1 5 A4+1 6 EA5+1 Number of accidents (x) -BINOM INV(500,0.001,RANDO) BETANV(RAND 1.5,3,500,20000) B2*C2 -8INOM . INV(500,0.001,RAND()) -8ЕТА.INV(RAND( ),1.53,500, 20000) -83°C3 BINOM.INv500,0.001,RAND) -BETA INV(RANDO15,3,500,20000 -B4*CA -8INOM.INV(500,0.001,RANDO) 1-8ЕТА.INV(RAND(),1.5,3,500.20000) |-85°C5 BINOM.INV500,0.001RANDBETA INV(RAND),1.5,3,500,20000) -B6 C6 BINOM.INV(500,0.001,RANDO)ETA.INV(RANDO 1.5,3,500,20000) B7*C7 BINOM.INv(500,0.001,RANDO) BETA.INV(RAND),1.5,3,500,20000)B8*C8 BINOM.INV(500,0.001,RANDI) BETA INV(RAND 1.5,3,500,20000) -B9 C9 BINOM.INV(500,0.001,RAND) BETA INV(RANDO0,1.5,3,500,20000) B10* C10 Total Cost (X Y) A7+1 10 A9+1

as values to avofd chenges. cs CamScanne

Total Number of The cost of an Cost accident 1 Trial # 1 accidents 2 1 6428 3101 3024 976 12362 6428 3101 3024 976 11853 11853 12219 24438 3797 10 10 3416 3862 12 7724

Average cost-of rootz? the Average o too u edl valoeroR the to cost. saimple averg e Cos of noy elected Cs Scanned with CamScanner et 구 2

Pepatiog Sith CamScanner CS

1 Trial # Number of accidents e cost of an accident 428.17638904559 101.21958342849 3024.30126537997 976.473446868161 -B2*C2 -B3 C3 B4 C4 VERAGE D2:D1001 D2:01001 3 A241 4 -43+1 A4+1 G2-G3 1.96 G2+63 1.96 Get this Total The cost of an Cost laccident Number of Trial # 2 1 |accidents (X) Average Cost 3,539 standard error 191.5575 Lower Bound 3,164 Upper bound 3,914 6428 3101 3024 976 6428 3101 3024 976 4 1

= $ 3, ley ound3y loco ex bound 2 opper Scanned wit CamScanner cs