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CNNBC recently reported that the mean annual cost of auto insurance is 967 dollars. Assume the standard deviation is 206 dollars. You take a simple random sample of 70 auto insurance policies. Find the probability that a single randomly selected value is less than 975 dollars. P(X<975)= ........

Find the probability that a sample of size n=70 is randomly selected with a mean less than 975 dollars. P(M<975)= .....

User Rassom
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Final answer:

To find the probability that a single randomly selected value is less than $975, we use the Z-score formula. The probability is approximately 0.5144. To find the probability that a sample of size n=70 is randomly selected with a mean less than $975, we use the Central Limit Theorem. The probability is approximately 0.6255.

Step-by-step explanation:

To find the probability that a single randomly selected value is less than $975, we need to use the Z-score formula. The Z-score formula is calculated as Z = (X - μ) / σ, where X is the value we want to find the probability for, μ is the mean, and σ is the standard deviation.

  1. Calculate the Z-score: Z = (975 - 967) / 206 = 0.0388.
  2. Look up the Z-score in the Z-table or use a calculator to find the corresponding probability. For a Z-score of 0.0388, the probability is approximately 0.5144.

Therefore, the probability that a single randomly selected value is less than $975 is 0.5144.

To find the probability that a sample of size n=70 is randomly selected with a mean less than $975, we can use the Central Limit Theorem. The Central Limit Theorem states that the sample means of sufficiently large samples from any population will be approximately normally distributed.

  1. Calculate the standard error: SE = σ / sqrt(n) = 206 / sqrt(70) = 24.637.
  2. Calculate the Z-score: Z = (975 - 967) / 24.637 = 0.3242.
  3. Look up the Z-score in the Z-table or use a calculator to find the corresponding probability. For a Z-score of 0.3242, the probability is approximately 0.6255.

Therefore, the probability that a sample of size n=70 is randomly selected with a mean less than $975 is 0.6255.

User Chris McKenzie
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