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Unformatted text preview: BIT 3424 HOMEWORK 5 (Due 4/2/08 by 12:00 noon) 1. Refer to the Hungry Dawg Restaurant example presented in class. a. What is the probability that the company’s liability will exceed $42 million? (Use 2000 replications.) b. Suppose the management of the company wants to set the amount contributed per employee at a level that such that there is only a 5% chance of the company’s liability exceeding $37 million. At what level should the employee contribution per employee be set? (Use 2000 replications.) 2. Refer to the Hungry Dawg Restaurant example presented in class. Health claim costs actually tend to be seasonal, with higher levels of claims occurring during the summer months (when kids are out of school and more likely to injure themselves) and during December (when people schedule elective procedures before the next year’s deductible must be paid). The following table summarizes the seasonal adjustment factors that apply to RNGs for average claims in the Hungry Dawg problem. For instance, the average claim for month 6 apply to RNGs for average claims in the Hungry Dawg problem....
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This note was uploaded on 04/02/2008 for the course BIT 3424 taught by Professor Dr.clifft.ragsdale during the Fall '08 term at Virginia Tech.
- Fall '08