An Insurance Company Estimates That It Should Make an Annual $3 \times 150 = 450$

An insurance company estimates that it should make an annual profit of $150 on each homeowner's policy written,with a standard deviation of $6000.If it writes three of these policies,the mean annual profit for the company is found to be $3 \times 150 = 450$ The standard deviation of the company's annual profit is found to be $\sqrt { 6000 ^ { 2 } + 6000 ^ { 2 } + 6000 ^ { 2 } } \approx \$ 10,392 .$ The calculation of the standard deviation requires the assumption that the policies are independent of one another.Which of the following examples describes a situation in which that assumption may be violated? A: The houses are close to each other and may all be affected by the same catastrophe such as earthquake,flooding,or fire.
B: The owners all bought their homes in the same year and may all be affected by a downturn in the market.
C: The owners of the three homes are related.
D: All three houses were bought for the same price.

A) B only
B) A,B,C,and D
C) A and C
D) A only
E) B and D

Correct Answer:

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