Discuss the following:
Q: A company examines homeowners records and sees that the mean loss from wind annually is $250 per house with std dev of $1000. They plan to sell wind insurance for $250 + estimates coverage costs & profits.
i) If they sell 10,000 policies, what is the probability that annual average loss is greater than $275?
ii) What shape would the loss distribution per home to be and why?
iii) Why it would be unwise to sell 12 policies or less.