An auto insurance policy have a deductible of 4 beside a maximum claim transfer of funds of 5. Auto loss amounts follow an
An auto insurance policy has a deductible of 4 with a maximum claim transmittal of 5. Auto loss amounts follow an exponential distribution of 8. Given the occurrence of an auto loss, calculate the expected claim gift made by this policy
Answers:
Say Y = total loss and X = loss to insurer
If Y <= 4, X = 0
If 4 => Y <= 9, X = Y - 4
If Y > 9, X = 5
Since exponential is a continuous distribution you need to integrate to find the probabilities.
E(X) = Int 0*F(Y) from 0 to 4 + Int (Y-4)*F(Y) from 4 to 9 + Int 5*F(Y) from 9 to infinity
Related Questions:
Answers:
Say Y = total loss and X = loss to insurer
If Y <= 4, X = 0
If 4 => Y <= 9, X = Y - 4
If Y > 9, X = 5
Since exponential is a continuous distribution you need to integrate to find the probabilities.
E(X) = Int 0*F(Y) from 0 to 4 + Int (Y-4)*F(Y) from 4 to 9 + Int 5*F(Y) from 9 to infinity
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