In: Statistics and Probability
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.
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.