Homework 13 Task 7

Your health insurance company has coverage for three types of

medical treatment. The annual cost for each type of treatment can be modeled

using the Gaussian (Normal) distribution., with the following parameters:

Treatment 1: Mean=$1600 and Standard Deviation =$120

Treatment 2: Mean =$1500 and Standard Deviation=$95

Treatment 3: Mean=$1200 and Standard Deviation =$70

Use Random number generator and simulate 1000 long columns for each of the three treatments.

Example: for Treatment 1, use Number of variables 1, Number of random numbers=1000, Distribution=Normal, Mean=1600 and leave random Seed empty.

Next: use either sorting or construct the appropriate histogram or rule of thumb to answer the questions

23. What is the approximate probability that Treatment 3 has annual cost less than $1150

oA. Between 20% and 30%

oB. Between 30% and 70%

oC. Between 70% and 85%

oD. None of these

24. Which of the three treatments is most likely to cost between $1200 and $1300?

oA. Treatment 1

oB. Treatment 2

oC. Treatment 3

25. For which of the three treatments do we expect approximately 95% of cases will cost between $1300 and $1700?

oA. Treatment 1

oB. Treatment 2

oC. Treatment 3