A farmer’s crop loss (hailstorm)has an exponential distribution with mean= 8. The insurance policy covering the...

A farmer’s crop loss (hailstorm)has an exponential distribution with mean= 8.

The insurance policy covering the loss pays 80% of the amount in excess of the deductible = 1.

So, for example, a loss = 10 results in a payment = 7.2 Compute E(payment).

Solutions

Expert Solution

Note: To get the final answer, I used R. My R-code as below:

> 4/5*8*exp(-1/8)
[1] 5.64798

orchestra answered 1 year ago

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