Losses are uniformly distributed on [0, m]. The insurer pays the amount of loss after a...

Losses are uniformly distributed on [0, m]. The insurer pays the amount of loss after a deductible of m/5.There is a 60% chance that the insurer pays at least 200. Find the probability that the insurer pays at least 500.

Expert Solution

We are given the distribution of losses here as:

The insurer pays the amount of loss after a deductible of m/5.

The insurance amount here is given as:

Now we are given here that there is a 60% chance that the insurer pays at least 200. Therefore the probability here is computed as:

Now the probability that the insurer pays at least 500 is computed here as:

Therefore 0.3 is the required probability here.

orchestra answered 3 years ago

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