An insurance company finds that 0.03% of the population dies of a certain disease each year....

An insurance company finds that 0.03% of the population dies of a certain disease each year. The company has insured 100,000 people against death from this disease. Compute the probability that the firm must pay off in three or more cases next year.

A. 0.6266

B. 0.5768

C. 0.4232

D. 0.9910

Expert Solution

expected number of deaths out of 100000 =100000*0.0003=3

therefore probability that the firm must pay off in three or more cases next year

=P(X>=3) =1-P(X<=2)

=1-(P(X=0)+P(X=1)+P(X=2))

=1-(e^-33⁰/0!+e^-33¹/1!+e^-33²/2!)

=1-0.4232 =0.5768

orchestra answered 2 years ago

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