Question

In: Statistics and Probability

An insurance company believes that people can be divided into two classes: those who are accident-prone...

An insurance company believes that people can be divided into two classes: those who are accident-prone and those who are not. Their statistics show that an accident-prone person will have an accident at some time within a fixed one-year period with probability 0.4, whereas this probability decreases to 0.2 for a non-accident-pron person Assume that 30% of the population is accident-prone.

a) What is the probability that a new policyholder will have an accident within a year of purchasing a policy?

b) Suppose that a new policyholder has an accident within a year of purchasing a policy What is the probability that he or she is accident-prone?

c) What is the conditional probability that a new policyholder will have an accident in his or her second year of policy ownership, given that the policyholder had an accident in the first year?

Solutions

Expert Solution

a)

probability that a new policyholder will have an accident within a year of purchasing a policy

=P(accident prone and accident)+P(not accident prone and accident)

=0.3*0.4+0.7*0.2=0.26

b)

P(accident prone given accident)=0.3*0.4/0.26=0.4615

c)

P(accident| accident in 1st year )=0.4615*0.4+(1-0.4615)*0.2 =0.2923


Related Solutions

An insurance company believes that people can be divided into two classes: those who are accident...
An insurance company believes that people can be divided into two classes: those who are accident prone and those who are not. Their statistics show that an accident prone person will have an accident within a year with a probability of 0.4, whereas the probability for a nonaccident prone person is 0.2. It is assumed that 30% of the population is accident prone. Given that a new policyholder has an accident within a year of purchasing a policy, what is...
B) An insurance company believes that people can be divided into two categories; those who are...
B) An insurance company believes that people can be divided into two categories; those who are accident prone and those who are not. The company’s statistics show that an accident-prone person will have a car accident within a one-year period with probability 0.4, whereas this probability decreases to 0.2 for a person who is not accident prone. The data also suggest that 30% of the population is accident prone. What is the probability that a new policyholder will have an...
An insurance company divided its clients into two categories, amateur and professional. The last year accident...
An insurance company divided its clients into two categories, amateur and professional. The last year accident report shows 10% of amateur drivers and 2.5% of professional drivers are involved in an accident. If 15% of drivers are amateur license and 85% are professional, find the following probabilities. For simplicity, assume year to year accident accidents for any driver are independent. a) What is the probability of accident for a driver? b) What is the probability that an amateur driver is...
Suppose that a given population can be divided into two parts: those who have a given...
Suppose that a given population can be divided into two parts: those who have a given disease and can infect others, and those who do not have it but are susceptible. Let x be the proportion of susceptible individuals and y the proportion of infectious individuals; then x + y = 1. Assume that the disease spreads by contact between sick and well members of the population and that the rate of spread dy∕dt is proportional to the number of...
Students who took STAT 1001 can be divided into two groups; those who attended class regularly...
Students who took STAT 1001 can be divided into two groups; those who attended class regularly and benefited from the awesome lecture and those who did not attend and missed out on great information. Two independent random samples of 20 students were taken from each group (i.e. n1 = n2 = 20), and their final exam scores were registered. The average grades for those who attended regularly and those who did not were 71.5% and 61.5%, respectively. Let’s assume that...
Into which classes are platyhelminthes divided? How can these classes be described and what are some...
Into which classes are platyhelminthes divided? How can these classes be described and what are some representative species in each of them?
Homeowners insurance policies can be divided into two sections. Describe them.
Homeowners insurance policies can be divided into two sections. Describe them.
Please Use your keyboard (Don't use handwriting) Stat (1) An insurance company believes that people can...
Please Use your keyboard (Don't use handwriting) Stat (1) An insurance company believes that people can be divided into two classes: those who are an accident prone and those who are not. The company’s statistics show that an accident-prone person will have an accident at some time within a fixed 1-year period with probability .4, whereas this probability decreases to .2 for a person who is not accident-prone. (i) If we assume that 30 percent of the population is accident...
The OSI layers can be divided between those that serve the network and those that serve...
The OSI layers can be divided between those that serve the network and those that serve the computer. Identify the layers concerned strictly with the network and the ones that serve the local computer.The OSI layers can be divided between those that serve the network and those that serve the computer. Identify the layers concerned strictly with the network and the ones that serve the local computer.
There is a theory that people who drink caffeine can run longer than those who do...
There is a theory that people who drink caffeine can run longer than those who do not. To test this theory a random sample of seven people who drink caffeine and a random sample of seven people who do not drink caffeine was obtained and their length of time they could run non-stop was measured, in seconds. non caffeine drinkers 359 280 138 227 203 184 231 caffeine drinkers 394 477 439 428 391 488 454 At the 5% significance...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT