An insurance policy on an electrical devicepays a benefit of $4000 if the device fails during the first year. The amount of the benefit decreases by $1000 each succes-sive year until it reaches 0. If the device has not failed by the beginning of any given year, the probability of failure duringthat year is 0.4. What is the expected benefit under this policy?Choose one of the following. Source: Society of Actuaries.a. $2234 b. $2400 c. $2500 d. $2667 e. $2694
Contingency Table
A contingency table can be defined as the visual representation of the relationship between two or more categorical variables that can be evaluated and registered. It is a categorical version of the scatterplot, which is used to investigate the linear relationship between two variables. A contingency table is indeed a type of frequency distribution table that displays two variables at the same time.
Binomial Distribution
Binomial is an algebraic expression of the sum or the difference of two terms. Before knowing about binomial distribution, we must know about the binomial theorem.
An insurance policy on an electrical device
pays a benefit of $4000 if the device fails during the first year.
The amount of the benefit decreases by $1000 each succes-
sive year until it reaches 0. If the device has not failed by the
beginning of any given year, the probability of failure during
that year is 0.4. What is the expected benefit under this policy?
Choose one of the following. Source: Society of Actuaries.
a. $2234 b. $2400 c. $2500 d. $2667 e. $2694
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