
Probability and Statistics Basic Probability and Statistics Math Forum 
 LinkBack  Thread Tools  Display Modes 
August 23rd, 2017, 07:11 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 oneyear 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 01:00 AM. 
August 24th, 2017, 01:12 AM  #2 
Global Moderator Joined: Dec 2006 Posts: 20,310 Thanks: 1978  

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 02:22 PM 
Expected Value of Discrete Random Variables  bureddogs44  Advanced Statistics  1  October 19th, 2011 02:39 PM 
Discrete random variable  hoyy1kolko  Algebra  1  February 13th, 2011 06:32 AM 
Discrete random variable  hoyy1kolko  Algebra  1  February 13th, 2011 06:08 AM 
Discrete random variable.  adbroadband  Algebra  1  January 31st, 2008 10:49 AM 