In any calendar year the probability of a tornado is 0.02 The number of tornadoes in any calendar year is independent of the number of tornadoes in any other calendar year Using the insurance company's assumptions calculate the probability that there are fewer than three tornadoes in a 13-year period round to four decimal places.
An insurance company prices is 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 tornadoes in any other calendar year
Using the insurance company's assumptions calculate the probability that there are fewer than three tornadoes in a 13-year period round to four decimal places.
Given that
In any calendar year there can be at most one tornado
In any calendar year the probability of a tornado is 0.02
P = 0.02
(1-P) = 1-0.02 = 0.98
The number of tornadoes in any calendar year is independent of the number of tornadoes in any other calendar year .
We know that
Binomial probability distribution
P(X=x) = nCx x Px x (1-P)(n-x)
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