Loss sizes have the following distribu Size Probability 1 0.6 2. 0.2 0.1 0.1 Calculate the expected annual payment under the stop-loss reinsurance contract.
Loss sizes have the following distribu Size Probability 1 0.6 2. 0.2 0.1 0.1 Calculate the expected annual payment under the stop-loss reinsurance contract.
A First Course in Probability (10th Edition)
10th Edition
ISBN:9780134753119
Author:Sheldon Ross
Publisher:Sheldon Ross
Chapter1: Combinatorial Analysis
Section: Chapter Questions
Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...
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Question
Q6
Transcribed Image Text:7. A reinsurance company offers a stop-loss reinsurance contract that pays the excess of annual
aggregate losses over 3.
You are given:
Loss counts follow a binomial distribution with n=3 and p=0.2.
Loss sizes have the following distribution:
Probability
Size
1
0.6
0.2
3
0.1
0.1
Calculate the expected annual payment under the stop-loss reinsurance contract.
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