On average, there is one hurricane in the Bahamas every year. The cost to repair the damage of each hurricane in the Bahamas to a particular resort is 100. To stabilize finances, the resort buys hurricane insurance, which will cover the cost of the repairs for each hurricane after the second. Assume that the number of hurricanes in the Bahamas in a given year is Poisson distributed.
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.
On average, there is one hurricane in the Bahamas every year. The cost to
repair the damage of each hurricane in the Bahamas to a particular resort is 100. To stabilize
finances, the resort buys hurricane insurance, which will cover the cost of the repairs for
each hurricane after the second. Assume that the number of hurricanes in the Bahamas in
a given year is Poisson distributed.
1. What is the expected cost of repairs in a given year to the resort (not including the
cost of insurance)?
2. What is the expected payout of the insurance company on the resort’s policy in a
given year?
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