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<math display = "block">
<math display = "block">
F(u) = 1-x^2.
F(u) = u^2.
</math>
</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.
Determine the probability that losses exceed $300.
 
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">
<li>[0.035, 0.04]</li>
  <li>0.064</li>
<li>[0.045, 0.05]</li>
  <li>0.0878</li>
<li>[0.055, 0.06]</li>
  <li>0.148</li>
<li>[0.07, 0.08]</li>
  <li>0.296</li>
<li>[0.09, 0.1]</li>
  <li>0.444</li>
</ul>
</ul>

Latest revision as of 17:56, 21 June 2025

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) = u^2. [[/math]]

Determine the probability that losses exceed $300.

  • 0.064
  • 0.0878
  • 0.148
  • 0.296
  • 0.444
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