My Math Forum  

Go Back   My Math Forum > High School Math Forum > Probability and Statistics

Probability and Statistics Basic Probability and Statistics Math Forum


Reply
 
LinkBack Thread Tools Display Modes
August 23rd, 2017, 06:11 PM   #1
Newbie
 
Joined: Aug 2017
From: Cincinnati, OH

Posts: 1
Thanks: 0

Expected value of a function of a discrete random variable

I'm new here, so perhaps this is beyond the intended purpose of the board. But, that doesn't mean it's beyond its members. Here is the question:

An insurance company sells a one-year automobile policy with a deductible of 2.
The probability that the insured will incur a loss is 0.05.
If there is a loss, the probability of a loss of amount N is K/N for N = 1; ... ; 5 and K a constant.
These are the only possible loss amounts and no more than one loss can occur.

Determine the net premium for this policy.

I have determined that K=60/137

Here is a chart of the probability distribution that I found:

Pr(N=1)= p(1) = 60/137
Pr(N=2) = 30/137
Pr(N=3) = 20/137
Pr(N=4) = 15/137
Pr(N=5) = 12/137

Here's where I start to get unsure, but think it's still on the right track:

E(K/N) = .05K*E(1/N) = K*(1(p(1)) + 1/2(p(2)) + 1/3(p(3)) + ... 1/5(p(5))

I'm not sure what to do with the deductible of 2. The answer is .0314 but I haven't found a way to get to it. Any help?

Last edited by skipjack; August 24th, 2017 at 12:00 AM.
snoopmt1 is offline  
 
August 24th, 2017, 12:12 AM   #2
Global Moderator
 
Joined: Dec 2006

Posts: 17,908
Thanks: 1382

skipjack is offline  
Reply

  My Math Forum > High School Math Forum > Probability and Statistics

Tags
discrete, expected, function, random, variable



Thread Tools
Display Modes


Similar Threads
Thread Thread Starter Forum Replies Last Post
Discrete Random Variable Keroro Advanced Statistics 2 August 17th, 2012 01:22 PM
Expected Value of Discrete Random Variables bureddogs44 Advanced Statistics 1 October 19th, 2011 01:39 PM
Discrete random variable hoyy1kolko Algebra 1 February 13th, 2011 05:32 AM
Discrete random variable hoyy1kolko Algebra 1 February 13th, 2011 05:08 AM
Discrete random variable. adbroadband Algebra 1 January 31st, 2008 09:49 AM





Copyright © 2017 My Math Forum. All rights reserved.