An insurance company wants to audit health insurance claims in its very large database of transactions....

An insurance company wants to audit health insurance claims in its very large database of transactions. In a quick attempt to assess the level of overstatement of this database, the insurance company selects at random 400 items from the database (each item rep- resents a dollar amount). Suppose that the population mean of the entire database is $8, with population standard deviation $2.

(i) Find the probability that the sample mean of the 400 would be less than $6.50.

(ii) Why can we use the normal distribution in obtaining an answer to part (i)?

(iii) For what value of e can we say that P (8 − e < X < 8 + e) is equal to 90%?

Expert Solution

orchestra answered 2 years ago

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