1. Use this Probability Distribution (PD) to answer the three questions below: J

Question

1. Use this Probability Distribution (PD) to answer the three questions below: Jimmy's Coffee House would like to estimate the number of worker's compensation claims for the upcoming year using accumulated data from the past 10 years. Upon review of this data it has been determined that Jimmy's has had between 0 and 2 claims annually. The loss distribution for Jimmy's Coffee House is as follows # of Worker's Compensation Losses per Year Probability of having this # of losses .2 a. Calculate the expected number of losses per year (mean) (2 points) b. Calculate the variance for the Jimmy's Coffee House frequency distribution. Hint -first, construct a Probability Distribution Table now that the mean has been determined (4 points) c. Jimmy's Coffee House wants to know how their risk compares to that of their competitor, Lulu's Café. Lulu's Café expects on average 1 accident per year with a variance of.60. Who faces more risk, Jimmy's or Lulu's? Hint: Jimmy 's and Lulus have different means Show your work. points) (6

Explanation / Answer

Lulu be at more risk here since

her variance is higher (0.60) than Jimmy’s of 0.29

as

higher the variance the higher the risk.

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