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*The annual inflation rate for year 1 has the following discrete distribution: 50% probability of 2% inflation, 30% probability of 1% inflation and 20% probability of no inflation. | *The annual inflation rate for year 1 has the following discrete distribution: 50% probability of 2% inflation, 30% probability of 1% inflation and 20% probability of no inflation. | ||
Assuming that inflation is independent of loss, determine the probability that losses for year 2 exceed $2,000. | Assuming that inflation is independent of loss, determine the interval containing the probability that losses for year 2 exceed $2,000. | ||
<ul class="mw-excansopts"> | <ul class="mw-excansopts"> | ||
Revision as of 23:45, 4 July 2024
Losses for year 1 equal
[[math]]\frac{1500(1-X^{1/3})}{1 + X^{1/3}}[[/math]]
with [math]X[/math] a non-negative random variable bounded by 1 with cumulative distribution function
[[math]]
F(u) = 1-x^2.
[[/math]]
- The annual inflation rate for year 1 has the following discrete distribution: 50% probability of 2% inflation, 30% probability of 1% inflation and 20% probability of no inflation.
Assuming that inflation is independent of loss, determine the interval containing the probability that losses for year 2 exceed $2,000.
- [0.035, 0.04]
- [0.045, 0.05]
- [0.055, 0.06]
- [0.07, 0.08]
- [0.09, 0.1]