4. The Civil Air Patrol also has planes in the Mid-Atlantic and West Regions.Based upon prior analysis, we know the following information:

Mid-Atlantic Region:

Mean= 0.160

Variance= 0.41

West Region:

Mean = 0.120

Variance = .13

a.Which region is riskier, the Mid-Atlantic Region or West Region? Show all calculations and explain your numerical results. (Consider carefully which measure of dispersion would give the best answer with respect to risk.)[4 points]

b. Suppose the insurance company can also cover the Mid-Atlantic and West

Regions under a single insurance policy rather than separate policies. The total premium under the combined policy is less than the total cost (sum of the two premiums) for insuring each of the regions separately. Provide a careful explanation as to why this might be the case. Give at least THREE reasons why this would be true. [6 points]