An auto insurance company classifies its customers in three categories: poor, satisfactory, and preferred. Each year, 5% of those in the poor category are moved tosatisfactory and 25% of those in the satisfactory category are moved to preferred. Also, 25% in the preferred category are moved to the satisfactory category, and 25%of those in the satisfactory category are moved to the poor category. Customers are never moved from poor to preferred, or conversely, in a single year. Assumingthese percentages remain valid over a long period of time, how many customers can the company expect to have in each category in the long run?Y

Sol:- Let P, S, and F denote the number of customers in the poor, satisfactory, and preferred…

Answered: An auto insurance company classifies…

Advanced Engineering Mathematics

10th Edition

ISBN:9780470458365

Author:Erwin Kreyszig

Publisher:Erwin Kreyszig

Chapter2: Second-order Linear Odes

Section: Chapter Questions

Problem 1RQ

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An insurance company offers four different deductible levels-none,low, medium, and high-for its homeowner's policyholders and threedifferent levels-low, medium, and high-for its automobilepolicyholders. The accompanying table gives proportions for the variouscategories of policyholders who have both types of insurance. Forexample, the proportion of individuals with both low homeowner'sdeductible and low auto deductible is .06 (6% of all such individuals). Homeowner's Auto N L M H LMH .04.07.02 .06.10.03 .05.20.15 .03.10.15 Suppose an individual having both types of policies is randomlyselected.a. What is the probability that the individual has a medium auto deductible and a high homeowner's deductible?b. What is the probability that the individual has a low autodeductible? A low homeowner's deductible?c. What is the probability that the individual is in the samecategory for both auto and homeowner's deductibles?d. Based on your answer in part (c), what is the probability…

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