which of the following statements is correct regarding the law of large numbers?
ID: 2710759 • Letter: W
Question
which of the following statements is correct regarding the law of large numbers?
a. it is only effective if the events being forecast are independent of one another, and have occurred in the past under substantially identical condition
b. it states that the inaccuracy between the empirical frequency and the theoretical probability will increase as the sample size increases
c. it indicates that as the uncertain surrounding the expected results decreases, the likelihood decreases that the range of outcomes will very widely
d. it represents the tendency for individuals who are highly vulnerable to loss from a specific risk to be inclined to purchase insurance
Explanation / Answer
Law of large numbers states that the average of results obtained from a large number of trails should be close to the expected value and will tend to become more close with increase in the number of trails. This follows that the empirical probability will converge to the theoretical probability.
From the above, the answer best represents this would be
c. it indicates that as the uncertainty surrounding the expected result decreases, the likelihood decreases that the range of outcomes will vary widely
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