A company prices its tornado insurance using the following assumptions: • In any calendar year, there can be at most one tornado. • In any calendar year, the probability of a tornado is 0.06. • The number of tornadoes in any calendar year is independent of the number of tornados in any other calendar year. Using the company's assumptions, calculate the probability that there are fewer than 3 tornadoes in a 17-year period. Round your answer to 4 decimals.
Continuous Probability Distributions
Probability distributions are of two types, which are continuous probability distributions and discrete probability distributions. A continuous probability distribution contains an infinite number of values. For example, if time is infinite: you could count from 0 to a trillion seconds, billion seconds, so on indefinitely. A discrete probability distribution consists of only a countable set of possible values.
Normal Distribution
Suppose we had to design a bathroom weighing scale, how would we decide what should be the range of the weighing machine? Would we take the highest recorded human weight in history and use that as the upper limit for our weighing scale? This may not be a great idea as the sensitivity of the scale would get reduced if the range is too large. At the same time, if we keep the upper limit too low, it may not be usable for a large percentage of the population!
A company prices its tornado insurance using the following assumptions:
• In any calendar year, there can be at most one tornado.
• In any calendar year, the
• The number of tornadoes in any calendar year is independent of the number of tornados in any other calendar year.
Using the company's assumptions, calculate the probability that there are fewer than 3 tornadoes in a 17-year period. Round your answer to 4 decimals.
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