Question 1199104: A car insurance plan pays $15,000 for a stolen car, $8,000 for a broken
car, and $5,000 for a damaged car. In the NY State every year, 2% of cars are
stolen, 5% of cars are broken, and 10% of cars are damaged.
Part a) What is the expected mean annual payment to a client μ?
Part b) What is the expected standard deviation of the annual payments to clients
σ?
Answer by ikleyn(52803)   (Show Source):
You can put this solution on YOUR website! .
My response consists of two parts.
(1) First part is to say that the problem is worded / posed / formulated INCORRECTLY.
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Because one client may have more than one car,
and we even don't know, how many cars an average client does have.
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The correct question, instead of (a), should be
a) What is the expected mean annual payment to a client per each one single care ?
(2) If you agree with this re-formulation, then here is the second part of my post,
which is the solution and the answer to this re-formulated question:
Expected mean annual payment to a client per each one single care is
E = 0.02*15000 + 0.05*8000 + 0.1*5000 = 1200 dollars. ANSWER
Solved.
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