An ASSIGNMENT On

STATISTICS PROBLEMS

Submitted towards the partial fulfillment of 4 Semester of M.B.A, INSURANCE for the Subject Statistics
th

Submitted by:
Himanshu Kachhwaha M.B.A, INSURANCE-4th SEM., Roll No.-304

Submitted to:
Dr. R. N. Agarwal Faculty of Management Studies

NATIONAL LAW UNIVERSITY, JODHPUR

INDEX S. No
1 2 3 4 5 6 7 8 9 10

PROBLEMS Diagrammatic presentation of Data Standard Deviation Relative Dispersion Probability (Addition Law) Assignment Problem Replacement Problem L.P.P.- (simplex method) Probability Probability (Baye's Theorem) Poison Distribution

Page No. 1 2-3 4-6 7-8 9-10 11-12 13-14 15-16 17 18

Problem no.-1: Diagrammatic presentation of Data

Submitted on: 28-1-2011

Checked on: 4-2-2011

Question: Whole life term insurance policies and money back life insurance policies issued by Bajaj Allianz Life insurance Company during financial year 2005-06 to 2009-10 are given in following table;

Year 2005-06 2006-07 2007-08 2008-09 2009-10

Whole life term insurance policies 25000 31000 30000 27000 36000

Money back policies 5000 4000 5000 3000 9000

Draw the compound bar chart for the above sold Whole life term insurance policies & Money back life insurance policies by Bajaj Allianz Insurance Company Ltd. Sol: Scale 1 cm = 5000 policies

45000 40000 35000 30000 25000 20000 15000 10000 0 5000

2005-06

2006-07

2007-08

2008-09

2009-10 3

Note: =

Money back policies Whole life term insurance policies

Conclusion: Compound bar chart has been successfully drawn for whole life insurance policies and money back insurance policies issued by Bajaj Allianz Life Insurance Company Limited.

Problem no.-2: Standard Deviation

Submitted on: 16-3-2011

Checked on: 18-3-2011

Question: Number of Jeevan Anand policies sold by Life Insurance Corporation of India at one of its branch office for various age group is shown in the following table. Compute the standard deviation of policies sold with respect to various age group Sol:
Age Group 0-10 10-20 20-30 30-40 40-50 50-60 60-70 Mid Value (x) 5 15 25 35 45 55 65 No. of Policies (f) 12000 8000 15000 20000 18000 15000 7000 95000 -30 -20 -10 0 10 20 30 900 400 100 0 100 400 900 10800000 3200000 1500000 0 1800000 6000000 6300000 29600000 -360000 -160000 -150000 180000 300000 210000 20000 d = x-A d2 fd2 fd

Sol: Let the assume mean be 35. Standard Deviation is denoted by .

=
= 17.65.

Conclusion: Standard deviation of the policies sold by one of the branch office of LIC with regard to various age group is 17.65

Problem no.-3: Relative Dispersion

Submitted on: 21-3-2011

Checked on: 24-3-2011

Question: Aviva Life Insurance Company sells a child insurance plan and an old age insurance plan. Determine which plan shows lesser variation in sales for a time period of 5 years from financial year 2006-2011.

Year

Child Insurance Plan

Arbitrary Origin (a) = 18000 Policies (x) x-a -3000 0 -1000 1000 4000 1000 (x-a)2 9000000 0 1000000 1000000 16000000 27000000

Old age Insurance Plan

Arbitrary Origin (a) = 21000 Policies (x) 20000 19000 21500 22000 23000 x-a -1000 -2000 500 1000 2000 500 (x-a)2 1000000 4000000 250000 1000000 4000000 10250000

2006-07 2007-08 2008-09 2009-10 2010-11

15000 18000 17000 19000 22000

Sol. Child Insurance plan:Mean = a + (xi - a) n = 18000 + 1000 5

Mean = 18000 + 200 = 18,200 policies.

Variance = 1 * n

(xi - a)2 { n

(xi - a) }2

Variance = 27000000 - (1000 / 5)2 = 5360000. 5 Standard Deviation

= 2315.16
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Therefore, Relative Dispersion = Standard Deviation Mean Relative Dispersion = 2315.16 = 0.127 18200 Old age Insurance Plan:Mean = a + (xi - a) n = 21000 + 500 5

Mean = 21000 + 100 = 21,100 policies.

Variance = 1 * n

(xi - a)2 { n

(xi - a) }2

Variance = 10250000 - (500 / 5)2 = 2040000. 5 Standard Deviation

= 1428.28

Therefore, Relative Dispersion = Standard Deviation Mean Relative Dispersion = 1428.28 = 0.067 21100

Conclusion Old age Insurance plan have lesser dispersion than Child Insurance plan. Thus, sales distribution of Old age plan is less variant than Child insurance plan of Aviva Life Insurance Company Limited.
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Problem no.-4: Probability (Addition Law)

Submitted on: 29-3-2011

Checked on: 1-4-2011

Question: A card is selected at random from a pack of playing cards by Ramesh. Find the probability of the card selected being; (i) (ii) Sol. (i) Let probability of odd cards be P(odd) and Let probability of below 9 cards be P(below 9) Ace is considered as lowest denomination. Then, P(odd) = 28/52 P(below 9) = 32/52 P(odd AND below 9) = 16/52 P(odd OR below 9) = [P(odd) + P(below 9)] - P(odd AND below 9) P(odd OR below 9) = (28/52 + 32/52) 16/52 = 44/52 = 11/13 (ii) Let probability of even cards be P(even) and Let probability of below 12 cards be P(below 12) P(even) = 24/52 P(below 12) = 44/52 P(even AND below 12) = 20/52 P(even OR below 12) = [P(even) + P(below 12)] - P(even AND below 12) P(even OR below 12) = (24/52 + 44/52) 20/52 = 48/52 = 12/13 Odd or below 9 Even or below 12

Conclusion: 1. Probability of cards being odd or below 9 as drawn by Ramesh is 11/13 2. Probability of cards being even or below 12 as drawn by Ramesh is 12/13

Problem no.-5: Binomial Distribution

Submitted on: 30-3-2011

Checked on: 1-4-2011

Question: In an electric shop, 10% of the electric switches are defective. If 15 switches are chosen at random. Find the probability of the number of defective switches being less than 5. Sol. P(r) = nCr Pr Qn-r P = probability of defective switches = 0.1 Q = probability of non - defective switches = 0.9 n = number of switches selected = 15 r = number of defective switches selected For less than 5, it can be 1,2,3 or 4 switches in the selected lot. P(r<5) = [15C1 (0.1)1 (0.9)14] + [15C2 (0.1)2 (0.9)13] + [15C3 (0.1)3 (0.9)12] + [15C4 (0.1)4 (0.9)11] P(r<5) = (15 x 0.1 x 0.2287) + (105 x 0.01 x 0.2541) + (455 x 0.001 x 0.2824) + (1365 x 0.0001 x 0.3138) P(r<5) = 0.34305 + 0.266805 + 0.128492 + 0.0428337 P(r<5) = 0.7811807

Conclusion Number of defective switches less than 5 have a probability of 0.7811807

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Problem no.-6: Bayes Theorem

Submitted on: 6-4-2011

Checked on: 8-4-2011

Question: Amit and Rakesh are having 2 sacks in their stall at a fair. Amit's sack contains 6 white and 5 red balls and Rakesh's sack contains 5 white and 5 red balls. Prize from drawing one white ball from either of the sacks is a tea set. Find the probability that the ball drawn from Amits sack. Sol. P (Amit's sack) = P(A) = P (Rakesh's sack) = P(R) = Prob. of white ball when it is drawn from Amit's sack = P(W/A) = 6/11 Prob. of white ball when it is drawn from Rakesh's sack = P(W/R) = 5/10 = 1/2 According to Baye's theorem, If A1, A2................An are mutually exclusive & exhaustive events with non zero probability and E is any other event with P > 0 then, probability of occurrence of A when E has already happened is
( ) ( )

In this question :Probability of Amit's sack when white ball is drawn is

( ) * ( )+ ( )

( )

Conclusion Probability of white ball from Amit's sack for winning a tea set is 12/23.

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Problem no.-7: Poison Distribution

Submitted on: 6-4-2011

Checked on: 8-4-2011

Question: In Rameshs telemarketing firm, if probability of permanent employees leaving their job is 0.01. Determine the probability that out of 100 employees, i) ii) Less than 2 employees leave in a year More than 2 employees leave in a year

Sol. n = 100, p = 0.01 Therefore, mean = m = 100 X 0.01 = 1. We know that,

= n X p.

1. P(r<2) = P(0) + P(1) P(r<2) = +

P(r<2) = 0.3678 + 0.3678 P(r<2) = 0.7356

2. P(r>2) = 1 [P(0) + P(1) + P(2)] P(r>2) = 1 [ + ]

P(r>2) = 1 [0.3678 + 0.3678 + 0.1839] P(r>2) = 1 0.9195 = 0.0805

Conclusion 1. Probability of less than 2 employees leaving their job is 0.7356. 2. Probability of more than 2 employees leaving their job is 0.0805.

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Problem no.-8: Combination of two distributions

Submitted on: 11-4-2011

Checked on: 12-4-2011

Question: Two samples of 10 &15 employees of two different insurance broking firms were taken and their monthly salary were observed. The mean and standard deviation of two samples is as follows; i) Raja Insurance Broking Pvt. Ltd. a) Mean salary = Rs. 20000 ii) Sunil Insurance Brokers Pvt. Ltd. a) Mean salary = 22000 b) Standard Deviation = Rs. 2000 b) Standard Deviation = Rs. 1000

Find combined mean & standard deviation of two samples. Sol.- n1 = 10, n2 = 15, x1 = 20000, x2 = 22000, S1 ( S2 (
1) 2)

= 1000 = 2000

Combined mean is denoted by X. X = n1 x1 + n2 x2 = (10 x 20000) + (15 x 22000) n1 + n2 10 + 15

X = 200000 + 330000 = Rs. 21200 25 Combined standard deviation is denoted by S. S2 = n1(S12 + d12) + n2(S22 + d22) n1 + n2 here, d1 = x x1 = 21200 20000 = 1200 d2 = x x2 = 21200 22000 = -800

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S2 = 10 [(1000)2 + (1200)2] + 15 [(2000)2 +(-800)2] 10 + 15 S2 = 24400000 + 69600000 = 3760000 25 S= = 1939.07

Conclusion The combined mean of salaries of samples is Rs. 21200 and combined standard deviation of salaries of samples is Rs. 1939.07

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Problem no.-9: Estimation (minimum sample size)

Submitted on:12

Checked on: 13-4-2011

Question: A research team has been given task of estimating the average time required in checking and scrutinizing all the documents of a person applying for home loans at a branch of Axis Bank. If the office receives about 25000 loan applications in a single financial year. The team wants to be 99% confident about the average time is to correct upto 10 minutes. The population variance of such applications is approximately 16000 (minutes) 2. Determine minimum sample size required by research team including finite population correction. Sol Minimum sample size is denoted by n0. n0 = Z2 d2 Given, N = 25000 Population variance (
2 2

) = 16000

Confidence level = 99% Corresponding value of Z = 2.58 Tolerance level = 10 n0 = (2.58)2 x 16000 (10)2 n0 = 6.6564 x 16000 = 1066 100

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If finite population correction (FPC) is included, minimum sample size will be, n0 = n0 1 + n0 N n0 = 1023 Conclusion The minimum sample size required by research team including finite population correction (FPC) will be 1023 applications of home loans. = 1066 1 + 1066 25000

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Problem no.-10: Interval Estimation

Submitted on: 13-4-2011

Checked on: 13-4-2011

Question: The Research & Development department of Pawan Cements Pvt. Ltd. Wants to estimate average number of cement bags each of 50 Kgs. in weight packaged per day. If the standard deviation of bags packaged per day is 10 and the average of bags packaged of a sample of 100 bags be equal to 90. Then find the 95% confidence interval for average cement bags packaged. SolSample mean = x = 90 Sample size = n = 100 Population standard deviation =

= 10

So, confidence interval for population mean () will be,

(xZx ),(x+Zx ) When C = 95% , the standard normal curve between Z to +Z is 95/100 = 0.95 and area between 0 to Z is equal to 0.95/2 = 0.4750 Thus, Z = 1.96 Then 95% confidence interval will be, (90 1.96 x ) , (90 + 1.96 x )

i.e, (90 1.96) , (90 + 1.96) Therefore, the 95% confidence interval for packaged bags is (88.04, 91.96).

Conclusion- The confidence interval of packaged cement bags of Pawan Cements Pvt. Ltd. per day is (88.04, 91.96).

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