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EXAM P PROBABILITY
P SAMPLE EXAM SOLUTIONS
Copyright 2009 by the Society of Actuaries and the Casualty Actuarial Society
Some of the questions in this study note are taken from past SOA/CAS examinations.
PRINTED IN U.S.A.
1 of 65
1. Solution: D
Let
event that a viewer watched gymnastics
event that a viewer watched baseball
event that a viewer watched soccer
G
B
S
=
=
=
Then we want to find
( ) ( )
( ) ( ) ( ) ( ) ( ) ( ) ( )
( )
Pr 1 Pr
1 Pr Pr Pr Pr Pr Pr Pr
1 0.28 0.29 0.19 0.14 0.10 0.12 0.08 1 0.48 0.52
c
G B S G B S
G B S G B G S B S G B S
⎡ ⎤
∪ ∪ = − ∪ ∪
⎣ ⎦
= − + + − ∩ − ∩ − ∩ + ∩ ∩ ⎡ ⎤
⎣ ⎦
= − + + − − − + = − =

2. Solution: A
Let R = event of referral to a specialist
L = event of lab work
We want to find
P[R∩L] = P[R] + P[L] – P[R∪L] = P[R] + P[L] – 1 + P[~(R∪L)]
= P[R] + P[L] – 1 + P[~R∩~L] = 0.30 + 0.40 – 1 + 0.35 = 0.05 .

3. Solution: D
First note
[ ] [ ] [ ] [ ]
[ ] [ ] [ ] [ ]
' ' '
P A B P A P B P A B
P A B P A P B P A B
∪ = + − ∩
∪ = + − ∩
Then add these two equations to get
[ ] [ ] [ ] [ ] [ ] ( ) [ ] [ ] ( )
[ ] ( ) ( )
[ ] [ ]
[ ]
' 2 ' '
0.7 0.9 2 1 '
1.6 2 1
0.6
P A B P A B P A P B P B P A B P A B
P A P A B A B
P A P A
P A
∪ + ∪ = + + − ∩ + ∩
+ = + − ∩ ∪ ∩ ⎡ ⎤
⎣ ⎦
= + −
=
2 of 65
4. Solution: A
( ) ( ) [ ]
1 2 1 2 1 2 1 2
For 1, 2, let
event that a red ball is drawn form urn
event that a blue ball is drawn from urn .
Then if is the number of blue balls in urn 2,
0.44 Pr[ ] Pr[ ] Pr
i
i
i
R i
B i
x
R R B B R R B B
=
=
=
= = +
=
∩ ∪ ∩ ∩ ∩
[ ] [ ] [ ] [ ]
1 2 1 2
Pr Pr Pr Pr
4 16 6
10 16 10 16
Therefore,
32 3 3 32
2.2
16 16 16
2.2 35.2 3 32
0.8 3.2
4
R R B B
x
x x
x x
x x x
x x
x
x
+
⎛ ⎞ ⎛ ⎞
= +
⎜ ⎟ ⎜ ⎟
+ +
⎝ ⎠ ⎝ ⎠
+
= + =
+ + +
+ = +
=
=

5. Solution: D
Let N(C) denote the number of policyholders in classification C . Then
N(Young ∩ Female ∩ Single) = N(Young ∩ Female) – N(Young ∩ Female ∩ Married)
= N(Young) – N(Young ∩ Male) – [N(Young ∩ Married) – N(Young ∩ Married ∩
Male)] = 3000 – 1320 – (1400 – 600) = 880 .

6. Solution: B
Let
H = event that a death is due to heart disease
F = event that at least one parent suffered from heart disease
Then based on the medical records,
210 102 108
937 937
937 312 625
937 937
c
c
P H F
P F
−
⎡ ⎤ ∩ = =
⎣ ⎦
−
⎡ ⎤ = =
⎣ ⎦
and
108 108 625
 0.173
937 937 625
c
c
c
P H F
P H F
P F
⎡ ⎤ ∩
⎣ ⎦
⎡ ⎤ = = = =
⎣ ⎦
⎡ ⎤
⎣ ⎦
3 of 65
7. Solution: D
Let
event that a policyholder has an auto policy
event that a policyholder has a homeowners policy
A
H
=
=
Then based on the information given,
( )
( ) ( ) ( )
( ) ( ) ( )
Pr 0.15
Pr Pr Pr 0.65 0.15 0.50
Pr Pr Pr 0.50 0.15 0.35
c
c
A H
A H A A H
A H H A H
∩ =
∩ = − ∩ = − =
∩ = − ∩ = − =
and the portion of policyholders that will renew at least one policy is given by
( ) ( ) ( )
( )( ) ( )( ) ( )( ) ( )
0.4 Pr 0.6 Pr 0.8 Pr
0.4 0.5 0.6 0.35 0.8 0.15 0.53 53%
c c
A H A H A H ∩ + ∩ + ∩
= + + = =

100292 01B9
8. Solution: D
Let
C = event that patient visits a chiropractor
T = event that patient visits a physical therapist
We are given that
[ ] [ ]
( )
( )
Pr Pr 0.14
Pr 0.22
Pr 0.12
c c
C T
C T
C T
= +
=
=
∩
∩
Therefore,
[ ] [ ] [ ] [ ]
[ ] [ ]
[ ]
0.88 1 Pr Pr Pr Pr Pr
Pr 0.14 Pr 0.22
2Pr 0.08
c c
C T C T C T C T
T T
T
⎡ ⎤ = − = = + −
⎣ ⎦
= + + −
= −
∩ ∪ ∩
or
[ ] ( ) Pr 0.88 0.08 2 0.48 T = + =
4 of 65
9. Solution: B
Let
event that customer insures more than one car
event that customer insures a sports car
M
S
=
=
Then applying DeMorgan’s Law, we may compute the desired
probability as follows:
( ) ( ) ( ) ( ) ( ) ( )
( ) ( ) ( ) ( ) ( )( )
Pr Pr 1 Pr 1 Pr Pr Pr
1 Pr Pr Pr Pr 1 0.70 0.20 0.15 0.70 0.205
c
c c
M S M S M S M S M S
M S S M M
⎡ ⎤
∩ = ∪ = − ∪ = − + − ∩ ⎡ ⎤
⎣ ⎦
⎣ ⎦
= − − + = − − + =

10. Solution: C
Consider the following events about a randomly selected auto insurance customer:
A = customer insures more than one car
B = customer insures a sports car
We want to find the probability of the complement of A intersecting the complement of B
(exactly one car, nonsports). But P ( A
c
∩ B
c
) = 1 – P (A ∪ B)
And, by the Additive Law, P ( A ∪ B ) = P ( A) + P ( B ) – P ( A ∩ B ).
By the Multiplicative Law, P ( A ∩ B ) = P ( B  A ) P (A) = 0.15 * 0.64 = 0.096
It follows that P ( A ∪ B ) = 0.64 + 0.20 – 0.096 = 0.744 and P (A
c
∩ B
c
) = 0.744 =
0.256

11. Solution: B
Let
C = Event that a policyholder buys collision coverage
D = Event that a policyholder buys disability coverage
Then we are given that P[C] = 2P[D] and P[C ∩ D] = 0.15 .
By the independence of C and D, it therefore follows that
0.15 = P[C ∩ D] = P[C] P[D] = 2P[D] P[D] = 2(P[D])
2
(P[D])
2
= 0.15/2 = 0.075
P[D] = 0.075 and P[C] = 2P[D] = 2 0.075
Now the independence of C and D also implies the independence of C
C
and D
C
. As a
result, we see that P[C
C
∩ D
C
] = P[C
C
] P[D
C
] = (1 – P[C]) (1 – P[D])
= (1 – 2 0.075 ) (1 – 0.075 ) = 0.33 .
5 of 65
12. Solution: E
“Boxed” numbers in the table below were computed.
High BP Low BP Norm BP Total
Regular heartbeat 0.09 0.20 0.56 0.85
Irregular heartbeat 0.05 0.02 0.08 0.15
Total 0.14 0.22 0.64 1.00
From the table, we can see that 20% of patients have a regular heartbeat and low blood
pressure.

13. Solution: C
The Venn diagram below summarizes the unconditional probabilities described in the
problem.
In addition, we are told that
[ ]
[ ]
[ ]
1

3 0.12
P A B C
x
P A B C A B
P A B x
∩ ∩
= ∩ ∩ ∩ = =
∩ +
It follows that
( )
1 1
0.12 0.04
3 3
2
0.04
3
0.06
x x x
x
x
= + = +
=
=
Now we want to find
( )
( )
[ ]
[ ]
( ) ( )
( )

1
1
1 3 0.10 3 0.12 0.06
1 0.10 2 0.12 0.06
0.28
0.467
0.60
c
c
c
c
P A B C
P A B C A
P A
P A B C
P A
⎡ ⎤
∪ ∪
⎣ ⎦
⎡ ⎤
∪ ∪ =
⎣ ⎦
⎡ ⎤
⎣ ⎦
− ∪ ∪
=
−
− − −
=
− − −
= =
6 of 65
14. Solution: A
p
k
=
1 2 3 0
1 1 1 1 1 1 1
... 0
5 5 5 5 5 5 5
k
k k k
p p p p k
− − −
⎛ ⎞
= = ⋅ ⋅ = = ≥
⎜ ⎟
⎝ ⎠
1 =
0
0 0
0 0
1 5
1
5 4
1
5
k
k
k k
p
p p p
∞ ∞
= =
⎛ ⎞
= = =
⎜ ⎟
⎝ ⎠
−
∑ ∑
p
0
= 4/5 .
Therefore, P[N > 1] = 1 – P[N ≤1] = 1 – (4/5 + 4/5 ⋅ 1/5) = 1 – 24/25 = 1/25 = 0.04 .

15. Solution: C
A Venn diagram for this situation looks like:
We want to find ( ) 1 w x y z = − + +
1 1 5
We have , ,
4 3 12
x y x z y z + = + = + =
Adding these three equations gives
( ) ( ) ( )
( )
( )
1 1 5
4 3 12
2 1
1
2
1 1
1 1
2 2
x y x z y z
x y z
x y z
w x y z
+ + + + + = + +
+ + =
+ + =
= − + + = − =
Alternatively the three equations can be solved to give x = 1/12, y = 1/6, z =1/4
again leading to
1 1 1 1
1
12 6 4 2
w
⎛ ⎞
= − + + =
⎜ ⎟
⎝ ⎠
7 of 65
16. Solution: D
Let
1 2
and N N denote the number of claims during weeks one and two, respectively.
Then since
1 2
and N N are independent,
[ ] [ ] [ ]
7
1 2 1 2
0
7
1 8 0
7
9 0
9 6
Pr 7 Pr Pr 7
1 1
2 2
1
2
8 1 1
2 2 64
n
n n n
n
N N N n N n
=
+ − =
=
+ = = = = −
⎛ ⎞⎛ ⎞
=
⎜ ⎟⎜ ⎟
⎝ ⎠⎝ ⎠
=
= = =
∑
∑
∑

17. Solution: D
Let
Event of operating room charges
Event of emergency room charges
O
E
=
=
Then
( ) ( ) ( ) ( )
( ) ( ) ( ) ( ) ( )
0.85 Pr Pr Pr Pr
Pr Pr Pr Pr Independence
O E O E O E
O E O E
= ∪ = + − ∩
= + −
Since
( ) ( ) Pr 0.25 1 Pr
c
E E = = − , it follows ( ) Pr 0.75 E = .
So ( ) ( )( ) 0.85 Pr 0.75 Pr 0.75 O O = + −
( )( ) Pr 1 0.75 0.10 O − =
( ) Pr 0.40 O =

18. Solution: D
Let X
1
and X
2
denote the measurement errors of the less and more accurate instruments,
respectively. If N(μ,σ) denotes a normal random variable with mean μ and standard
deviation σ, then we are given X
1
is N(0, 0.0056h), X
2
is N(0, 0.0044h) and X
1
, X
2
are
independent. It follows that Y =
2 2 2 2
1 2
0.0056 0.0044
is N (0, )
2 4
X X h h + +
= N(0,
0.00356h) . Therefore, P[−0.005h ≤ Y ≤ 0.005h] = P[Y ≤ 0.005h] – P[Y ≤ −0.005h] =
P[Y ≤ 0.005h] – P[Y ≥ 0.005h]
= 2P[Y ≤ 0.005h] – 1 = 2P
0.005
0.00356
h
Z
h
⎡ ⎤
≤
⎢ ⎥
⎣ ⎦
− 1 = 2P[Z ≤ 1.4] – 1 = 2(0.9192) – 1 = 0.84.
8 of 65
19. Solution: B
Apply Bayes’ Formula. Let
Event of an accident A =
1
B = Event the driver’s age is in the range 1620
2
B =Event the driver’s age is in the range 2130
3
B = Event the driver’s age is in the range 3065
4
B = Event the driver’s age is in the range 6699
Then
( )
( ) ( )
( ) ( ) ( ) ( ) ( ) ( ) ( ) ( )
( )( )
( )( ) ( )( ) ( )( ) ( )( )
1 1
1
1 1 2 2 3 3 4 4
Pr Pr
Pr
Pr Pr Pr Pr Pr Pr Pr Pr
0.06 0.08
0.1584
0.06 0.08 0.03 0.15 0.02 0.49 0.04 0.28
A B B
B A
A B B A B B A B B A B B
=
+ + +
= =
+ + +

20. Solution: D
Let
S = Event of a standard policy
F = Event of a preferred policy
U = Event of an ultrapreferred policy
D = Event that a policyholder dies
Then
[ ]
[ ] [ ]
[ ] [ ] [ ] [ ] [ ] [ ]
( ) ( )
( ) ( ) ( ) ( ) ( ) ( )


  
0.001 0.10
0.01 0.50 0.005 0.40 0.001 0.10
0.0141
P D U P U
P U D
P D S P S P D F P F P D U P U
=
+ +
=
+ +
=

21. Solution: B
Apply Baye’s Formula:
[ ]
[ ] [ ] [ ]
( )( )
( )( ) ( )( ) ( )( )
Pr Seri. Surv.
Pr Surv. Seri. Pr Seri.
Pr Surv. Crit. Pr Crit. Pr Surv. Seri. Pr Seri. Pr Surv. Stab. Pr Stab.
0.9 0.3
0.29
0.6 0.1 0.9 0.3 0.99 0.6
⎡ ⎤
⎣ ⎦
⎡ ⎤
⎣ ⎦
=
⎡ ⎤ + ⎡ ⎤ + ⎡ ⎤
⎣ ⎦ ⎣ ⎦ ⎣ ⎦
= =
+ +
9 of 65
22. Solution: D
Let
Event of a heavy smoker
Event of a light smoker
Event of a nonsmoker
Event of a death within fiveyear period
H
L
N
D
=
=
=
=
Now we are given that
1
Pr 2 Pr and Pr Pr
2
D L D N D L D H ⎡ ⎤ = ⎡ ⎤ ⎡ ⎤ = ⎡ ⎤
⎣ ⎦ ⎣ ⎦ ⎣ ⎦ ⎣ ⎦
Therefore, upon applying Bayes’ Formula, we find that
[ ]
[ ] [ ] [ ]
( )
( ) ( ) ( )
Pr Pr
Pr
Pr Pr Pr Pr Pr Pr
2Pr 0.2
0.4
0.42
1
0.25 0.3 0.4
Pr 0.5 Pr 0.3 2Pr 0.2
2
D H H
H D
D N N D L L D H H
D L
D L D L D L
⎡ ⎤
⎣ ⎦
⎡ ⎤ =
⎣ ⎦
⎡ ⎤ + ⎡ ⎤ + ⎡ ⎤
⎣ ⎦ ⎣ ⎦ ⎣ ⎦
⎡ ⎤
⎣ ⎦
= = =
+ +
⎡ ⎤ + ⎡ ⎤ + ⎡ ⎤
⎣ ⎦ ⎣ ⎦ ⎣ ⎦

23. Solution: D
Let
C = Event of a collision
T = Event of a teen driver
Y = Event of a young adult driver
M = Event of a midlife driver
S = Event of a senior driver
Then using Bayes’ Theorem, we see that
P[Y⏐C] =
[ ] [ ]
[ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ]
P C Y P Y
P C T P T P C Y P Y P C M P M P C S P S + + +
=
(0.08)(0.16)
(0.15)(0.08) (0.08)(0.16) (0.04)(0.45) (0.05)(0.31) + + +
= 0.22 .

24. Solution: B
Observe
[ ]
[ ]
Pr 1 4
1 1 1 1 1 1 1 1 1
Pr 1 4
6 12 20 30 2 6 12 20 30 Pr 4
10 5 3 2 20 2
30 10 5 3 2 50 5
N
N N
N
≤ ≤
⎡ ⎤ ⎡ ⎤
⎡ ≥ ≤ ⎤ = = + + + + + + +
⎣ ⎦ ⎢ ⎥ ⎢ ⎥
≤
⎣ ⎦ ⎣ ⎦
+ + +
= = =
+ + + +
10 of 65
25. Solution: B
Let Y = positive test result
D = disease is present (and ~D = not D)
Using Baye’s theorem:
P[DY] =
[  ] [ ] (0.95)(0.01)
[  ] [ ] [ ~ ] [~ ] (0.95)(0.01) (0.005)(0.99)
P Y D P D
P Y D P D P Y D P D
=
+ +
= 0.657 .

26. Solution: C
Let:
S = Event of a smoker
C = Event of a circulation problem
Then we are given that P[C] = 0.25 and P[S⏐C] = 2 P[S⏐C
C
]
Now applying Bayes’ Theorem, we find that P[C⏐S] =
[ ] [ ]
[ ] [ ] [ ]( [ ])
C C
P S C P C
P S C P C P S C P C +
=
2 [ ] [ ]
2(0.25) 2 2
2(0.25) 0.75 2 3 5 2 [ ] [ ] [ ](1 [ ])
C
C C
P S C P C
P S C P C P S C P C
= = =
+ + + −
.

27. Solution: D
Use Baye’s Theorem with A = the event of an accident in one of the years 1997, 1998 or
1999.
P[1997A] =
[ 1997] [1997]
[ 1997][ [1997] [ 1998] [1998] [ 1999] [1999]
P A P
P A P P A P P A P + +
=
(0.05)(0.16)
(0.05)(0.16) (0.02)(0.18) (0.03)(0.20) + +
= 0.45 .

11 of 65
28. Solution: A
Let
C = Event that shipment came from Company X
I
1
= Event that one of the vaccine vials tested is ineffective
Then by Bayes’ Formula, [ ]
[ ] [ ]
[ ] [ ]
1
1
1 1


 
c c
P I C P C
P C I
P I C P C P I C P C
=
⎡ ⎤ ⎡ ⎤ +
⎣ ⎦ ⎣ ⎦
Now
[ ]
[ ]
[ ] ( ) ( ) ( )
( ) ( ) ( )
29
30
1 1
29
30
1 1
1
5
1 4
1 1
5 5
 0.10 0.90 0.141
 0.02 0.98 0.334
c
c
P C
P C P C
P I C
P I C
=
⎡ ⎤ = − = − =
⎣ ⎦
= =
⎡ ⎤ = =
⎣ ⎦
Therefore,
[ ]
( ) ( )
( ) ( ) ( ) ( )
1
0.141 1/ 5
 0.096
0.141 1/ 5 0.334 4/ 5
P C I = =
+

29. Solution: C
Let T denote the number of days that elapse before a highrisk driver is involved in an
accident. Then T is exponentially distributed with unknown parameter λ . Now we are
given that
0.3 = P[T ≤ 50] =
50
50
0
0
t t
e dt e
λ λ
λ
− −
= −
∫
= 1 – e
–50λ
Therefore, e
–50λ
= 0.7 or λ = − (1/50) ln(0.7)
It follows that P[T ≤ 80] =
80
80
0
0
t t
e dt e
λ λ
λ
− −
= −
∫
= 1 – e
–80λ
= 1 – e
(80/50) ln(0.7)
= 1 – (0.7)
80/50
= 0.435 .

30. Solution: D
Let N be the number of claims filed. We are given P[N = 2] =
2 4
3
2! 4!
e e
λ λ
λ λ
− −
= = 3 ⋅ P[N
= 4]24 λ
2
= 6 λ
4
λ
2
= 4 ⇒ λ = 2
Therefore, Var[N] = λ = 2 .
12 of 65
31. Solution: D
Let X denote the number of employees that achieve the high performance level. Then X
follows a binomial distribution with parameters 20 and 0.02 n p = = . Now we want to
determine x such that
[ ]
Pr 0.01 X x > ≤
or, equivalently,
[ ] ( )( ) ( )
20
20
0
0.99 Pr 0.02 0.98
x k k
k
k
X x
−
=
≤ ≤ =
∑
The following table summarizes the selection process for x:
[ ] [ ]
( )
( )( )
( ) ( )
20
19
2 18
Pr Pr
0 0.98 0.668 0.668
1 20 0.02 0.98 0.272 0.940
2 190 0.02 0.98 0.0
x X x X x = ≤
=
=
= 53 0.993
Consequently, there is less than a 1% chance that more than two employees will achieve
the high performance level. We conclude that we should choose the payment amount C
such that
2 120, 000 C =
or
60, 000 C =

32. Solution: D
Let
X = number of lowrisk drivers insured
Y = number of moderaterisk drivers insured
Z = number of highrisk drivers insured
f(x, y, z) = probability function of X, Y, and Z
Then f is a trinomial probability function, so
[ ] ( ) ( ) ( ) ( )
( ) ( ) ( ) ( ) ( ) ( ) ( )
4 3 3 2 2
Pr 2 0, 0, 4 1, 0, 3 0,1, 3 0, 2, 2
4!
0.20 4 0.50 0.20 4 0.30 0.20 0.30 0.20
2!2!
0.0488
z x f f f f ≥ + = + + +
= + + +
=
13 of 65
33. Solution: B
Note that
[ ] ( )
20
2 20
2 2
1
Pr 0.005 20 0.005 20
2
1 1
0.005 400 200 20 0.005 200 20
2 2
x
x
X x t dt t t
x x x x
⎛ ⎞
> = − = −
⎜ ⎟
⎝ ⎠
⎛ ⎞ ⎛ ⎞
= − − + = − +
⎜ ⎟ ⎜ ⎟
⎝ ⎠ ⎝ ⎠
∫
where 0 20 x < < . Therefore,
[ ]
[ ]
( ) ( )
( ) ( )
2
2
1
200 20 16 16
Pr 16
8 1
2
Pr 16 8
1
Pr 8 72 9
200 20 8 8
2
X
X X
X
− +
>
⎡ > > ⎤ = = = =
⎣ ⎦
>
− +

34. Solution: C
We know the density has the form ( )
2
10 C x
−
+ for 0 40 x < < (equals zero otherwise).
First, determine the proportionality constant C from the condition
40
0
( ) 1 f x dx =
∫
:
( )
40
40
2
1
0
0
2
1 10 (10 )
10 50 25
C C
C x dx C x C
−
−
= + =− + = − =
∫
so 25 2 C = , or 12.5 . Then, calculate the probability over the interval (0, 6):
( ) ( ) ( )
6
6
2 1
0
0
1 1
12.5 10 10 12.5 0.47
10 16
x dx x
− − ⎛ ⎞
+ = − + = − =
⎜ ⎟
⎝ ⎠
∫
.

35. Solution: C
Let the random variable T be the future lifetime of a 30yearold. We know that the
density of T has the form f (x) = C(10 + x)
−2
for 0 < x < 40 (and it is equal to zero
otherwise). First, determine the proportionality constant C from the condition
40
0
( ) 1: f x dx ∫ =
1 =
40
1 40
0
0
2
( ) (10 ) 
25
f x dx C x C
−
=− + =
∫
so that C =
25
2
= 12.5. Then, calculate P(T < 5) by integrating f (x) = 12.5 (10 + x)
−2
over the interval (0.5).
14 of 65
36. Solution: B
To determine k, note that
1 = ( ) ( )
1
4 5
1
0
0
1 1
5 5
k k
k y dy y − = − − =
∫
k = 5
We next need to find P[V > 10,000] = P[100,000 Y > 10,000] = P[Y > 0.1]
= ( ) ( )
1
4 5
1
0.1
0.1
5 1 1 y dy y − = − −
∫
= (0.9)
5
= 0.59 and P[V > 40,000]
= P[100,000 Y > 40,000] = P[Y > 0.4] = ( ) ( )
1
4 5
1
0.4
0.4
5 1 1 y dy y − = − −
∫
= (0.6)
5
= 0.078 .
It now follows that P[V > 40,000⏐V > 10,000]
=
[ 40, 000 10, 000] [ 40, 000] 0.078
[ 10, 000] [ 10, 000] 0.590
P V V P V
P V P V
> ∩ > >
= =
> >
= 0.132 .

37. Solution: D
Let T denote printer lifetime. Then f(t) = ½ e
–t/2
, 0 ≤ t ≤ ∞
Note that
P[T ≤ 1] =
1
/ 2 / 2 1
0
0
1
2
t t
e dt e
− −
=
∫
= 1 – e
–1/2
= 0.393
P[1 ≤ T ≤ 2] =
2
2
/ 2 / 2
1
1
1
2
t t
e dt e
− −
=
∫
= e
–1/2
− e
–1
= 0.239
Next, denote refunds for the 100 printers sold by independent and identically distributed
random variables Y
1
, . . . , Y
100
where
200 with probability 0.393
100 with probability 0.239 i = 1, . . . , 100
0 with probability 0.368
i
Y
⎧
⎪
=
⎨
⎪
⎩
Now E[Y
i
] = 200(0.393) + 100(0.239) = 102.56
Therefore, Expected Refunds = [ ]
100
1
i
i
E Y
=
∑
= 100(102.56) = 10,256 .
15 of 65
38. Solution: A
Let F denote the distribution function of f. Then
( ) [ ]
4 3 3
1 1
Pr 3 1
x x
F x X x t dt t x
− − −
= ≤ = = − = −
∫
Using this result, we see
[ ]
( ) ( )
[ ]
[ ] [ ]
[ ]
( ) ( )
( )
( ) ( )
( )
3 3
3
3
Pr 2 1.5 Pr 2 Pr 1.5
Pr 2 1.5
Pr 1.5 Pr 1.5
2 1.5 1.5 2
3
1 0.578
1 1.5 4
1.5
X X X X
X X
X X
F F
F
− −
−
∩ ≥ ⎡ ⎤ − ≤
⎣ ⎦
≥ = =
≥ ≥
− −
⎛ ⎞
= = = − =
⎜ ⎟
−
⎝ ⎠
< <
< 

39. Solution: E
Let X be the number of hurricanes over the 20year period. The conditions of the
problem give x is a binomial distribution with n = 20 and p = 0.05 . It follows that
P[X < 2] = (0.95)
20
(0.05)
0
+ 20(0.95)
19
(0.05) + 190(0.95)
18
(0.05)
2
= 0.358 + 0.377 + 0.189 = 0.925 .

40. Solution: B
Denote the insurance payment by the random variable Y. Then
0 if 0
if C 1
X C
Y
X C X
< ≤ ⎧
=
⎨
− < <
⎩
Now we are given that
( ) ( ) ( )
0.5
0.5
2
2
0
0
0.64 Pr 0.5 Pr 0 0.5 2 0.5
C
C
Y X C x dx x C
+
+
= < = < < + = = = +
∫
Therefore, solving for C, we find 0.8 0.5 C = ± −
Finally, since 0 1 C < < , we conclude that 0.3 C =
16 of 65
41. Solution: E
Let
X = number of group 1 participants that complete the study.
Y = number of group 2 participants that complete the study.
Now we are given that X and Y are independent.
Therefore,
( ) ( ) ( ) ( ) { }
( ) ( ) ( ) ( )
( ) ( )
[ ] [ ]
[ ] [ ]
[ ] [ ] ( )
( )
10
9
9 9 9 9
9 9 9 9
2 9 9 (due to symmetry)
2 9 9
2 9 9 (again due to symmetry)
2 9 1 9
2 0.
P X Y X Y
P X Y P X Y
P X Y
P X P Y
P X P X
P X P X
≥ ∩ ∪ ∩ ≥ ⎡ ⎤ ⎡ ⎤
⎣ ⎦ ⎣ ⎦
= ≥ ∩ + ∩ ≥ ⎡ ⎤ ⎡ ⎤
⎣ ⎦ ⎣ ⎦
= ≥ ∩ ⎡ ⎤
⎣ ⎦
= ≥
= ≥
= ≥ − ≥
=
< <
< <
<
<
<
( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( )
[ ][ ]
9 10 9 10
10 10 10
10 9 10
2 0.8 0.8 1 0.2 0.8 0.8
2 0.376 1 0.376 0.469
⎡ ⎤ ⎡ ⎤
+ − −
⎣ ⎦ ⎣ ⎦
= − =

42. Solution: D
Let
I
A
= Event that Company A makes a claim
I
B
= Event that Company B makes a claim
X
A
= Expense paid to Company A if claims are made
X
B
= Expense paid to Company B if claims are made
Then we want to find
( ) ( )
{ }
( ) ( )
[ ] [ ] [ ] [ ]
( ) ( ) ( ) ( ) [ ]
[ ]
Pr
Pr Pr
Pr Pr Pr Pr Pr (independence)
0.60 0.30 0.40 0.30 Pr 0
0.18 0.12Pr 0
C
A B A B A B
C
A B A B A B
C
A B A B A B
B A
B A
I I I I X X
I I I I X X
I I I I X X
X X
X X
⎡ ⎤ ∩ ∪ ∩ ∩ ⎡ ⎤
⎣ ⎦ ⎣ ⎦
⎡ ⎤ = ∩ + ∩ ∩ ⎡ ⎤
⎣ ⎦ ⎣ ⎦
⎡ ⎤ = +
⎣ ⎦
= + − ≥
= + − ≥
<
<
<
Now
B A
X X − is a linear combination of independent normal random variables.
Therefore,
B A
X X − is also a normal random variable with mean
[ ] [ ] [ ] 9, 000 10, 000 1, 000
B A B A
M E X X E X E X = − = − = − = −
and standard deviation ( ) ( ) ( ) ( )
2 2
Var Var 2000 2000 2000 2
B A
X X σ = + = + =
It follows that
17 of 65
[ ]
[ ]
1000
Pr 0 Pr ( is standard normal)
2000 2
1
Pr
2 2
1
1 Pr
2 2
1 Pr 0.354
B A
X X Z Z
Z
Z
Z
⎡ ⎤
− ≥ = ≥
⎢ ⎥
⎣ ⎦
⎡ ⎤
= ≥
⎢ ⎥
⎣ ⎦
⎡ ⎤
= −
⎢ ⎥
⎣ ⎦
= − <
<
1 0.638 0.362 = − =
Finally,
( ) ( )
{ }
( ) ( ) Pr 0.18 0.12 0.362
0.223
C
A B A B A B
I I I I X X ⎡ ⎤ ∩ ∪ ∩ ∩ = + ⎡ ⎤
⎣ ⎦ ⎣ ⎦
=
<

43. Solution: D
If a month with one or more accidents is regarded as success and k = the number of
failures before the fourth success, then k follows a negative binomial distribution and the
requested probability is
[ ] [ ] ( )
( ) ( ) ( ) ( )
4
3
3
0
4 0 1 2 3
3 4 5 6
0 1 2 3
4
3 2
Pr 4 1 Pr 3 1
5 5
3 2 2 2 2
1
5 5 5 5 5
3 8 8 32
1 1
5 5 5 25
0.2898
k
k
k
k
k k
+
=
⎛ ⎞ ⎛ ⎞
≥ = − ≤ = −
⎜ ⎟ ⎜ ⎟
⎝ ⎠ ⎝ ⎠
⎡ ⎤
⎛ ⎞ ⎛ ⎞ ⎛ ⎞ ⎛ ⎞ ⎛ ⎞
= − + + +
⎢ ⎥
⎜ ⎟ ⎜ ⎟ ⎜ ⎟ ⎜ ⎟ ⎜ ⎟
⎝ ⎠ ⎝ ⎠ ⎝ ⎠ ⎝ ⎠ ⎝ ⎠
⎢ ⎥
⎣ ⎦
⎛ ⎞ ⎡ ⎤
= − + + +
⎜ ⎟
⎢ ⎥
⎝ ⎠ ⎣ ⎦
=
∑
Alternatively the solution is
( ) ( ) ( )
4 4 4 2 4 3
4 5 6
1 2 3
2 2 3 2 3 2 3
0.2898
5 5 5 5 5 5 5
⎛ ⎞ ⎛ ⎞ ⎛ ⎞ ⎛ ⎞ ⎛ ⎞ ⎛ ⎞
+ + + =
⎜ ⎟ ⎜ ⎟ ⎜ ⎟ ⎜ ⎟ ⎜ ⎟ ⎜ ⎟
⎝ ⎠ ⎝ ⎠ ⎝ ⎠ ⎝ ⎠ ⎝ ⎠ ⎝ ⎠
which can be derived directly or by regarding the problem as a negative binomial
distribution with
i) success taken as a month with no accidents
ii) k = the number of failures before the fourth success, and
iii) calculating
[ ]
Pr 3 k ≤
18 of 65
44. Solution: C
If k is the number of days of hospitalization, then the insurance payment g(k) is
g(k) =
{
100 for 1, 2, 3
300 50( 3) for 4, 5.
k k
k k
=
+ − =
Thus, the expected payment is
5
1 2 3 4 5
1
( ) 100 200 300 350 400 k
k
g k p p p p p p
=
= + + + +
∑
=
( )
1
100 5 200 4 300 3 350 2 400 1
15
× + × + × + × + × =220

45. Solution: D
Note that ( )
0 4
2 2 3 3
0 4
2 0
2 0
8 64 56 28
10 10 30 30 30 30 30 15
x x x x
E X dx dx
−
−
= − + = − + = − + = =
∫ ∫

46. Solution: D
The density function of T is
( )
/ 3
1
, 0
3
t
f t e t
−
= ∞ < <
Therefore,
[ ] ( )
2
/ 3 / 3
0 2
/ 3 2 / 3 / 3
0 2
2
2/ 3 2/ 3 / 3
2
2/ 3
max , 2
2
3 3
2
2 2 2 3
2 3
t t
t t t
t
E X E T
t
e dt e dt
e te e dt
e e e
e
∞
− −
∞
− − ∞ −
− − − ∞
−
= ⎡ ⎤
⎣ ⎦
= +
= − − +
= − + + −
= +
∫ ∫
∫
 

19 of 65
47. Solution: D
Let T be the time from purchase until failure of the equipment. We are given that T is
exponentially distributed with parameter λ = 10 since 10 = E[T] = λ . Next define the
payment
P under the insurance contract by
for 0 1
x
for 1 3
2
0 for 3
x T
P T
T
≤ ≤ ⎧
⎪
⎪
= < ≤
⎨
⎪
> ⎪
⎩
We want to find x such that
1000 = E[P] =
1
0
10
x
∫
e
–t/10
dt +
3
1
1
2 10
x
∫
e
–t/10
dt =
1
/10 /10 3
1
0
2
t t
x
xe e
− −
− −
= −x e
–1/10
+ x – (x/2) e
–3/10
+ (x/2) e
–1/10
= x(1 – ½ e
–1/10
– ½ e
–3/10
) = 0.1772x .
We conclude that x = 5644 .

48. Solution: E
Let X and Y denote the year the device fails and the benefit amount, respectively. Then
the density function of X is given by
( ) ( ) ( )
1
0.6 0.4 , 1, 2, 3...
x
f x x
−
= =
and
( ) 1000 5 if 1, 2, 3, 4
0 if 4
x x
y
x
− = ⎧
⎪
=
⎨
>
⎪
⎩
It follows that
[ ] ( ) ( )( ) ( ) ( ) ( ) ( )
2 3
4000 0.4 3000 0.6 0.4 2000 0.6 0.4 1000 0.6 0.4
2694
E Y = + + +
=

49. Solution: D
Define ( ) f X to be hospitalization payments made by the insurance policy. Then
( )
100 if 1, 2, 3
( )
300 25 3 if 4, 5
X X
f X
X X
= ⎧
⎪
=
⎨
+ − =
⎪
⎩
and
20 of 65
( ) ( ) [ ]
[ ]
5
1
Pr
5 4 3 2 1
100 200 300 325 350
15 15 15 15 15
1 640
100 160 180 130 70 213.33
3 3
k
E f X f k X k
=
= = ⎡ ⎤
⎣ ⎦
⎛ ⎞ ⎛ ⎞ ⎛ ⎞ ⎛ ⎞ ⎛ ⎞
= + + + +
⎜ ⎟ ⎜ ⎟ ⎜ ⎟ ⎜ ⎟ ⎜ ⎟
⎝ ⎠ ⎝ ⎠ ⎝ ⎠ ⎝ ⎠ ⎝ ⎠
= + + + + = =
∑

50. Solution: C
Let N be the number of major snowstorms per year, and let P be the amount paid to
the company under the policy. Then Pr[N = n] =
3/ 2
(3/ 2)
!
n
e
n
−
, n = 0, 1, 2, . . . and
0 for 0
10, 000( 1) for 1
N
P
N N
= ⎧
=
⎨
− ≥
⎩
.
Now observe that E[P] =
3/ 2
1
(3/ 2)
10, 000( 1)
!
n
n
e
n
n
− ∞
=
−
∑
= 10,000 e
–3/2
+
3/ 2
0
(3/ 2)
10, 000( 1)
!
n
n
e
n
n
− ∞
=
−
∑
= 10,000 e
–3/2
+ E[10,000 (N – 1)]
= 10,000 e
–3/2
+ E[10,000N] – E[10,000] = 10,000 e
–3/2
+ 10,000 (3/2) – 10,000 = 7,231 .

51. Solution: C
Let Y denote the manufacturer’s retained annual losses.
Then
for 0.6 2
2 for 2
x x
Y
x
< ≤ ⎧
=
⎨
>
⎩
and E[Y] =
2 2 2.5 2.5 2.5 2.5
3.5 3.5 2.5 2.5
2
0.6 2 0.6
2.5(0.6) 2.5(0.6) 2.5(0.6) 2(0.6)
2 x dx dx dx
x x x x
∞
∞
⎡ ⎤ ⎡ ⎤
+ = −
⎢ ⎥ ⎢ ⎥
⎣ ⎦ ⎣ ⎦
∫ ∫ ∫
=
2.5 2.5 2.5 2.5 2.5
2
1.5 2.5 1.5 1.5 1.5
0.6
2.5(0.6) 2(0.6) 2.5(0.6) 2.5(0.6) (0.6)
1.5 (2) 1.5(2) 1.5(0.6) 2 x
− + = − + + = 0.9343 .
21 of 65
52. Solution: A
Let us first determine K. Observe that
1 1 1 1 60 30 20 15 12 137
1 1
2 3 4 5 60 60
60
137
K K K
K
+ + + + ⎛ ⎞ ⎛ ⎞ ⎛ ⎞
= + + + + = =
⎜ ⎟ ⎜ ⎟ ⎜ ⎟
⎝ ⎠ ⎝ ⎠ ⎝ ⎠
=
It then follows that
[ ] [ ]
( )
Pr Pr Insured Suffers a Loss Pr Insured Suffers a Loss
60 3
0.05 , 1,..., 5
137 137
N n N n
N
N N
= = ⎡ = ⎤
⎣ ⎦
= = =
Now because of the deductible of 2, the net annual premium
[ ]
P E X = where
0 , if 2
2 , if 2
N
X
N N
≤ ⎧
=
⎨
− >
⎩
Then,
[ ] ( ) ( )
( ) ( )
5
3
3 1 3 3
2 1 2 3 0.0314
137 137 137 4 137 5
N
P E X N
N
=
⎡ ⎤ ⎡ ⎤
⎛ ⎞
= = − = + + =
⎢ ⎥ ⎢ ⎥
⎜ ⎟
⎝ ⎠
⎣ ⎦ ⎣ ⎦
∑

53. Solution: D
Let W denote claim payments. Then
for 1 10
10 for 10
y y
W
y
< ≤ ⎧
=
⎨
≥
⎩
It follows that E[W] =
10
10
3 3 2
10 1
1 10
2 2 2 10
10 y dy dy
y y y y
∞
∞
+ = − −
∫ ∫
= 2 – 2/10 + 1/10 = 1.9 .
22 of 65
54. Solution: B
Let Y denote the claim payment made by the insurance company.
Then
( )
0 with probability 0.94
Max 0, 1 with probability 0.04
14 with probability 0.02
Y x
⎧
⎪
= −
⎨
⎪
⎩
and
[ ] ( ) ( ) ( ) ( ) ( ) ( ) ( )
( )
( )
( )
15
/ 2
1
15 15
/ 2 / 2
1 1
15 15
/ 2 15 / 2 / 2
1
1 1
7.5 0.5 / 2
0.94 0 0.04 0.5003 1 0.02 14
0.020012 0.28
0.28 0.020012 2 2
0.28 0.020012 30 2
x
x x
x x x
x
E Y x e dx
xe dx e dx
xe e dx e dx
e e e d
−
− −
− − −
− − −
= + − +
⎡ ⎤
= − +
⎢ ⎥
⎣ ⎦
⎡ ⎤
= + − + −
⎢ ⎥
⎣ ⎦
= + − + +
∫
∫ ∫
∫ ∫

( )
( ) ( )
( ) ( )
( ) ( )
15
1
7.5 0.5 / 2 15
1
7.5 0.5 7.5 0.5
7.5 0.5
0.28 0.020012 30 2 2
0.28 0.020012 30 2 2 2
0.28 0.020012 32 4
0.28 0.020012 2.408
0.328 (in tho
x
x
e e e
e e e e
e e
− − −
− − − −
− −
⎡ ⎤
⎢ ⎥
⎣ ⎦
⎡ ⎤ = + − + −
⎣ ⎦
= + − + − +
= + − +
= +
=
∫

usands)
It follows that the expected claim payment is 328 .

55. Solution: C
The pdf of x is given by f(x) =
4
(1 )
k
x +
, 0 < x < ∞ . To find k, note
1 =
0
4 3
0
1
(1 ) 3 (1 ) 3
k k k
dx
x x
∞
∞
= − =
+ +
∫
k = 3
It then follows that E[x] =
4
0
3
(1 )
x
dx
x
∞
+
∫
and substituting u = 1 + x, du = dx, we see
E[x] =
4
1
3( 1) u
du
u
∞
−
∫
= 3
2 3
3 4
1 1
1 1
( ) 3 3
2 3 2 3
u u
u u du
∞
∞ − −
− −
⎡ ⎤
⎡ ⎤
− = − = −
⎢ ⎥
⎢ ⎥
− −
⎣ ⎦
⎣ ⎦
∫
= 3/2 – 1 = ½ .
23 of 65
56. Solution: C
Let Y represent the payment made to the policyholder for a loss subject to a deductible D.
That is
0 for 0
for 1
X D
Y
x D D X
≤ ≤ ⎧
=
⎨
− < ≤
⎩
Then since E[X] = 500, we want to choose D so that
1000 2 2
1000 1 1 1 ( ) (1000 )
500 ( )
4 1000 1000 2 2000
D
D
x D D
x D dx
− −
= − = =
∫
(1000 – D)
2
= 2000/4 ⋅ 500 = 500
2
1000 – D = ± 500
D = 500 (or D = 1500 which is extraneous).

57. Solution: B
We are given that M
x
(t) =
4
1
(1 2500 ) t −
for the claim size X in a certain class of accidents.
First, compute M
x
′(t) =
5 5
( 4)( 2500) 10, 000
(1 2500 ) (1 2500 ) t t
− −
=
− −
M
x
″(t) =
6 6
(10, 000)( 5)( 2500) 125, 000, 000
(1 2500 ) (1 2500 ) t t
− −
=
− −
Then E[X] = M
x
′ (0) = 10,000
E[X
2
] = M
x
″ (0) = 125,000,000
Var[X] = E[X
2
] – {E[X]}
2
= 125,000,000 – (10,000)
2
= 25,000,000
[ ] Var X = 5,000 .

58. Solution: E
Let X
J
, X
K
, and X
L
represent annual losses for cities J, K, and L, respectively. Then
X = X
J
+ X
K
+ X
L
and due to independence
M(t) =
( )
J K L J K L
x x x t x t x t x t xt
E e E e E e E e E e
+ +
⎡ ⎤
⎡ ⎤ ⎡ ⎤ ⎡ ⎤ ⎡ ⎤ = =
⎣ ⎦ ⎣ ⎦ ⎣ ⎦ ⎣ ⎦
⎣ ⎦
= M
J
(t) M
K
(t) M
L
(t) = (1 – 2t)
–3
(1 – 2t)
–2.5
(1 – 2t)
–4.5
= (1 – 2t)
–10
Therefore,
M′(t) = 20(1 – 2t)
–11
M″(t) = 440(1 – 2t)
–12
M″′(t) = 10,560(1 – 2t)
–13
E[X
3
] = M″′(0) = 10,560
24 of 65
59. Solution: B
The distribution function of X is given by
( )
( ) ( ) ( )
2.5 2.5 2.5
3.5 2.5 2.5
200
200
2.5 200 200 200
1 , 200
x
x
F x dt x
t t x
−
= = = − >
∫
Therefore, the
th
p percentile
p
x of X is given by
( )
( )
( )
( )
( )
2.5
2.5
2.5
2.5
2 5
2 5
200
1
100
200
1 0.01
200
1 0.01
200
1 0.01
p
p
p
p
p
p
F x
x
p
x
p
x
x
p
= = −
− =
− =
=
−
It follows that
( ) ( )
70 30 2 5 2 5
200 200
93.06
0.30 0.70
x x − = − =

60. Solution: E
Let X and Y denote the annual cost of maintaining and repairing a car before and after
the 20% tax, respectively. Then Y = 1.2X and Var[Y] = Var[1.2X] = (1.2)
2
Var[X] =
(1.2)
2
(260) = 374 .

61. Solution: A
The first quartile, Q1, is found by ¾ =
Q1
∞
z
f(x) dx . That is, ¾ = (200/Q1)
2.5
or
Q1 = 200 (4/3)
0.4
= 224.4 . Similarly, the third quartile, Q3, is given by Q3 = 200 (4)
0.4
= 348.2 . The interquartile range is the difference Q3 – Q1 .
25 of 65
62. Solution: C
First note that the density function of X is given by
( )
1
if 1
2
1 if 1 2
0 otherwise
x
x x
f x
⎧
=
⎪
⎪
⎪
− < <
=
⎨
⎪
⎪
⎪
⎩
Then
( ) ( ) ( )
( ) ( ) ( )
( ) ( ) ( )
2
2 2
2 3 2
1 1
1
2
2 2
2 2 3 2 4 3
1 1
1
2
2
2
1 1 1 1 1
1
2 2 2 3 2
1 8 4 1 1 7 4
1
2 3 2 3 2 3 3
1 1 1 1 1
1
2 2 2 4 3
1 16 8 1 1 17 7 23
2 4 3 4 3 4 3 12
23 4 23 16 5
12 3 12 9 36
E X x x dx x x dx x x
E X x x dx x x dx x x
Var X E X E X
⎛ ⎞
= + − = + − = + −
⎜ ⎟
⎝ ⎠
= + − − + = − =
⎛ ⎞
= + − = + − = + −
⎜ ⎟
⎝ ⎠
= + − − + = − =
⎛ ⎞
= − = − = − = ⎡ ⎤
⎜ ⎟ ⎣ ⎦
⎝ ⎠
∫ ∫
∫ ∫

63. Solution: C
Note
if 0 4
4 if 4 5
X X
Y
X
≤ ≤ ⎧
=
⎨
≤
⎩
<
Therefore,
[ ]
[ ] [ ] ( )
4 5
2 4 5
0 4
0 4
4 5
2 2 3 4 5
0 4
0 4
2
2
2
1 4 1 4
5 5 10 5
16 20 16 8 4 12
10 5 5 5 5 5
1 16 1 16
5 5 15 5
64 80 64 64 16 64 48 112
15 5 5 15 5 15 15 15
112 12
Var 1.71
15 5
E Y xdx dx x x
E Y x dx dx x x
Y E Y E Y
= + = +
= + − = + =
⎡ ⎤ = + = +
⎣ ⎦
= + − = + = + =
⎛ ⎞
⎡ ⎤ = − = − =
⎜ ⎟
⎣ ⎦
⎝ ⎠
∫ ∫
∫ ∫
 
 
26 of 65
64. Solution: A
Let X denote claim size. Then E[X] = [20(0.15) + 30(0.10) + 40(0.05) + 50(0.20) +
60(0.10) + 70(0.10) + 80(0.30)] = (3 + 3 + 2 + 10 + 6 + 7 + 24) = 55
E[X
2
] = 400(0.15) + 900(0.10) + 1600(0.05) + 2500(0.20) + 3600(0.10) + 4900(0.10)
+ 6400(0.30) = 60 + 90 + 80 + 500 + 360 + 490 + 1920 = 3500
Var[X] = E[X
2
] – (E[X])
2
= 3500 – 3025 = 475 and [ ] Var X = 21.79 .
Now the range of claims within one standard deviation of the mean is given by
[55.00 – 21.79, 55.00 + 21.79] = [33.21, 76.79]
Therefore, the proportion of claims within one standard deviation is
0.05 + 0.20 + 0.10 + 0.10 = 0.45 .

65. Solution: B
Let X and Y denote repair cost and insurance payment, respectively, in the event the auto
is damaged. Then
0 if 250
250 if 250
x
Y
x x
≤ ⎧
=
⎨
− >
⎩
and
[ ] ( ) ( )
( ) ( )
[ ] [ ] { } ( )
[ ]
2
1500
2
1500
250
250
3
1500
2 3
2 1500
250
250
2
2
2
1 1 1250
250 250 521
1500 3000 3000
1 1 1250
250 250 434, 028
1500 4500 4500
Var 434, 028 521
Var 403
E Y x dx x
E Y x dx x
Y E Y E Y
Y
= − = − = =
⎡ ⎤ = − = − = =
⎣ ⎦
⎡ ⎤ = − = −
⎣ ⎦
=
∫
∫

66. Solution: E
Let X
1
, X
2
, X
3
, and X
4
denote the four independent bids with common distribution
function F. Then if we define Y = max (X
1
, X
2
, X
3
, X
4
), the distribution function G of Y is
given by
( ) [ ]
( ) ( ) ( ) ( )
[ ] [ ] [ ] [ ]
( )
( )
1 2 3 4
1 2 3 4
4
4
Pr
Pr
Pr Pr Pr Pr
1 3 5
1 sin ,
16 2 2
G y Y y
X y X y X y X y
X y X y X y X y
F y
y y π
= ≤
= ≤ ∩ ≤ ∩ ≤ ∩ ≤ ⎡ ⎤
⎣ ⎦
= ≤ ≤ ≤ ≤
= ⎡ ⎤
⎣ ⎦
= + ≤ ≤
It then follows that the density function g of Y is given by
27 of 65
( ) ( )
( ) ( )
( )
3
3
'
1
1 sin cos
4
3 5
cos 1 sin ,
4 2 2
g y G y
y y
y y y
π π π
π
π π
=
= +
= + ≤ ≤
Finally,
[ ] ( )
( )
5/ 2
3/ 2
5/ 2
3
3/ 2
cos 1 sin
4
E Y yg y dy
y y y dy
π
π π
=
= +
∫
∫

67. Solution: B
The amount of money the insurance company will have to pay is defined by the random
variable
1000 if 2
2000 if 2
x x
Y
x
< ⎧
=
⎨
≥
⎩
where x is a Poisson random variable with mean 0.6 . The probability function for X is
( )
( )
[ ] ( )
( ) ( )
( )
( )
0.6
0.6 0.6
2
0.6 0.6 0.6 0.6
0
0.6 0.6 0.6 0.6 0.6
0
0.6
0,1, 2, 3 and
!
0.6
0 1000 0.6 2000
!
0.6
1000 0.6 2000 0.6
!
0.6
2000 2000 1000 0.6 2000 2000 600
!
573
k
k
k
k
k
k
k
e
p x k
k
E Y e e
k
e e e e
k
e e e e e
k
−
∞
− −
=
∞
− − − −
=
∞
− − − − −
=
= =
= + +
⎛ ⎞
= + − −
⎜ ⎟
⎝ ⎠
= − − = − −
=
∑
∑
∑
( ) ( ) ( )
( ) ( ) ( ) ( ) ( )
( ) ( ) ( ) ( ) ( )
[ ] [ ] { } ( )
2 2
2 0.6 0.6
2
2 2 2 2
0.6 0.6 0.6
0
2 2 2 2
0.6 0.6
2
2
2
0.6
1000 0.6 2000
!
0.6
2000 2000 2000 1000 0.6
!
2000 2000 2000 1000 0.6
816,893
Var 816,893 573
k
k
k
k
E Y e e
k
e e e
k
e e
Y E Y E Y
∞
− −
=
∞
− − −
=
− −
⎡ ⎤ = +
⎣ ⎦
⎡ ⎤
= − − −
⎣ ⎦
⎡ ⎤
= − − −
⎣ ⎦
=
⎡ ⎤ = − = −
⎣ ⎦
∑
∑
[ ]
488, 564
Var 699 Y
=
=
28 of 65
68. Solution: C
Note that X has an exponential distribution. Therefore, c = 0.004 . Now let Y denote the
claim benefits paid. Then
for 250
250 for 250
x x
Y
x
< ⎧
=
⎨
≥
⎩
and we want to find m such that 0.50
=
0.004 0.004
0
0
0.004
m
m
x x
e dx e
− −
= −
∫
= 1 – e
–0.004m
This condition implies e
–0.004m
= 0.5 ⇒ m = 250 ln 2 = 173.29 .

69. Solution: D
The distribution function of an exponential random variable
T with parameter θ is given by ( ) 1 , 0
t
F t e t
θ −
= − >
Since we are told that T has a median of four hours, we may determine θ as follows:
( )
( )
( )
4
4
1
4 1
2
1
2
4
ln 2
4
ln 2
F e
e
θ
θ
θ
θ
−
−
= = −
=
− = −
=
Therefore, ( ) ( )
( ) 5ln 2
5 5 4
4
Pr 5 1 5 2 0.42 T F e e
θ
−
− −
≥ = − = = = =

70. Solution: E
Let X denote actual losses incurred. We are given that X follows an exponential
distribution with mean 300, and we are asked to find the 95
th
percentile of all claims that
exceed 100 . Consequently, we want to find p
95
such that
0.95 =
95 95
Pr[100 ] ( ) (100)
[ 100] 1 (100)
x p F p F
P X F
< < −
=
> −
where F(x) is the distribution function of X .
Now F(x) = 1 – e
–x/300
.
Therefore, 0.95 =
95 95
95
/ 300 / 300 100/ 300 1/ 3
/ 300 1/ 3
100/ 300 1/ 3
1 (1 )
1
1 (1 )
p p
p
e e e e
e e
e e
− − − −
−
− −
− − − −
= = −
− −
95
/ 300 p
e
−
= 0.05 e
–1/3
p
95
= −300 ln(0.05 e
–1/3
) = 999
29 of 65
71. Solution: A
The distribution function of Y is given by
( ) ( ) ( ) ( )
2
Pr Pr 1 4 G y T y T y F y y = ≤ = ≤ = = −
for 4 y > . Differentiate to obtain the density function ( )
2
4 g y y
−
=
Alternate solution:
Differentiate ( ) F t to obtain ( )
3
8 f t t
−
= and set
2
y t = . Then t y = and
( ) ( ) ( ) ( ) ( )
3 2 1 2 2
1
8 4
2
d
g y f t y dt dy f y y y y y
dt
− − −
⎛ ⎞
= = = =
⎜ ⎟
⎝ ⎠

72. Solution: E
We are given that R is uniform on the interval ( ) 0.04, 0.08 and 10, 000
R
V e =
Therefore, the distribution function of V is given by
( ) [ ] ( ) ( )
( ) ( )
( ) ( )
( ) ( )
ln ln 10,000
ln ln 10,000
0.04
0.04
Pr Pr 10, 000 Pr ln ln 10, 000
1 1
25ln 25ln 10, 000 1
0.04 0.04
25 ln 0.04
10, 000
R
v
v
F v V v e v R v
dr r v
v
−
−
⎡ ⎤ = ≤ = ≤ = ≤ − ⎡ ⎤
⎣ ⎦ ⎣ ⎦
= = = − −
⎡ ⎤ ⎛ ⎞
= −
⎢ ⎥ ⎜ ⎟
⎝ ⎠ ⎣ ⎦
∫

73. Solution: E
( ) [ ]
( )
( )
10
8
10
8
0.8 10
Pr Pr 10 Pr 1
10
Y
Y
F y Y y X y X e
− ⎡ ⎤
⎡ ⎤ = ≤ = ≤ = ≤ = −
⎢ ⎥ ⎣ ⎦
⎣ ⎦
Therefore, ( ) ( )
( )
5 4
1
4
10
1
8 10
Y
Y
f y F y e
− ⎛ ⎞
′ = =
⎜ ⎟
⎝ ⎠
30 of 65
74. Solution: E
First note R = 10/T . Then
F
R
(r) = P[R ≤ r] =
10 10 10
1
T
P r P T F
T r r
⎡ ⎤ ⎡ ⎤ ⎛ ⎞
≤ = ≥ = −
⎜ ⎟
⎢ ⎥ ⎢ ⎥
⎣ ⎦ ⎣ ⎦ ⎝ ⎠
. Differentiating with respect to
r f
R
(r) = F′
R
(r) = d/dr ( )
2
10 10
1
T T
d
F F t
r dt r
⎛ ⎞ − ⎛ ⎞ ⎛ ⎞⎛ ⎞
− = −
⎜ ⎟ ⎜ ⎟⎜ ⎟ ⎜ ⎟
⎝ ⎠ ⎝ ⎠⎝ ⎠ ⎝ ⎠
1
( ) ( )
4
T T
d
F t f t
dt
= = since T is uniformly distributed on [8, 12] .
Therefore f
R
(r) =
2 2
1 10 5
4 2 r r
− − ⎛ ⎞
=
⎜ ⎟
⎝ ⎠
.

75. Solution: A
Let X and Y be the monthly profits of Company I and Company II, respectively. We are
given that the pdf of X is f . Let us also take g to be the pdf of Y and take F and G to be
the distribution functions corresponding to f and g . Then G(y) = Pr[Y ≤ y] = P[2X ≤ y]
= P[X ≤ y/2] = F(y/2) and g(y) = G′(y) = d/dy F(y/2) = ½ F′(y/2) = ½ f(y/2) .

76. Solution: A
First, observe that the distribution function of X is given by
( )
1
4 3 3
1
3 1 1
1 , 1
x
x
F x dt x
t t x
= = − = −
∫
 >
Next, let X
1
, X
2
, and X
3
denote the three claims made that have this distribution. Then if
Y denotes the largest of these three claims, it follows that the distribution function of Y is
given by
( ) [ ] [ ] [ ]
1 2 3
3
3
Pr Pr Pr
1
1 , 1
G y X y X y X y
y
y
= ≤ ≤ ≤
⎛ ⎞
= −
⎜ ⎟
⎝ ⎠
>
while the density function of Y is given by
( ) ( )
2 2
3 4 4 3
1 3 9 1
' 3 1 1 , 1 g y G y y
y y y y
⎛ ⎞ ⎛ ⎞ ⎛ ⎞⎛ ⎞
= = − = −
⎜ ⎟ ⎜ ⎟ ⎜ ⎟⎜ ⎟
⎝ ⎠ ⎝ ⎠ ⎝ ⎠⎝ ⎠
>
Therefore,
31 of 65
[ ]
2
3 3 3 3 6
1 1
3 6 9 2 5 8
1
1
9 1 9 2 1
1 1
9 18 9 9 18 9
2 5 8
1 2 1
9 2.025 (in thousands)
2 5 8
E Y dy dy
y y y y y
dy
y y y y y y
∞ ∞
∞
∞
⎛ ⎞ ⎛ ⎞
= − = − +
⎜ ⎟ ⎜ ⎟
⎝ ⎠ ⎝ ⎠
⎛ ⎞ ⎡ ⎤
= − + = − + −
⎜ ⎟ ⎢ ⎥
⎝ ⎠ ⎣ ⎦
⎡ ⎤
= − + =
⎢ ⎥
⎣ ⎦
∫ ∫
∫

77. Solution: D
Prob. = 1−
2 2
1 1
1
( )
8
x y dxdy +
∫ ∫
= 0.625
Note
( ) ( ) ( ) ( )
{ }
( ) ( ) ( ) ( )
( ) ( ) ( ) ( ) ( )
2 2 2
2
2
1
1 1 1
2
2 2 3 3
2
1
1
Pr 1 1 Pr 1 1 (De Morgan's Law)
1 1 1
1 Pr 1 1 1 1
8 8 2
1 1 1
1 2 1 1 2 1 1 64 27 27 8
16 48 48
18 30
1 0.625
48 48
c
X Y X Y
X Y x y dxdy x y dy
y y dy y y
≤ ≤ = > > ⎡ ⎤ ⎡ ⎤
⎣ ⎦ ⎣ ⎦
= − > > = − + = − + ⎡ ⎤
⎣ ⎦
⎡ ⎤ ⎡ ⎤
= − + − + = − + − + = − − − +
⎣ ⎦ ⎣ ⎦
= − = =
∫ ∫ ∫
∫
∪ ∩
∩

78. Solution: B
That the device fails within the first hour means the joint density function must be
integrated over the shaded region shown below.
This evaluation is more easily performed by integrating over the unshaded region and
subtracting from 1.
32 of 65
( ) ( )
( )
( ) ( ) ( )
3
2
3 3 3 3
1 1 1 1
1
3
3
2
1
1
Pr 1 1
2 1
1 1 1 9 6 1 2
27 54 54
1 1 1 32 11
1 8 4 1 8 2 1 24 18 8 2 1 0.41
54 54 54 54 27
X Y
x y x xy
dx dy dy y y dy
y dy y y
< ∪ < ⎡ ⎤
⎣ ⎦
+ +
= − = − = − + − −
= − + = − + = − + − − = − = =
∫ ∫ ∫ ∫
∫

79. Solution: E
The domain of s and t is pictured below.
Note that the shaded region is the portion of the domain of s and t over which the device
fails sometime during the first half hour. Therefore,
( ) ( )
1/ 2 1 1 1/ 2
0 1/ 2 0 0
1 1
Pr , ,
2 2
S T f s t dsdt f s t dsdt
⎡ ⎤ ⎛ ⎞ ⎛ ⎞
≤ ∪ ≤ = +
⎜ ⎟ ⎜ ⎟ ⎢ ⎥
⎝ ⎠ ⎝ ⎠ ⎣ ⎦
∫ ∫ ∫ ∫
(where the first integral covers A and the second integral covers B).

80. Solution: C
By the central limit theorem, the total contributions are approximately normally
distributed with mean ( )( ) 2025 3125 6, 328,125 nμ = = and standard deviation
250 2025 11, 250 n σ = = . From the tables, the 90
th
percentile for a standard normal
random variable is 1.282 . Letting p be the 90
th
percentile for total contributions,
1.282,
p n
n
μ
σ
−
= and so ( )( ) 1.282 6, 328,125 1.282 11, 250 6, 342, 548 p n n μ σ = + = + = .
33 of 65

81. Solution: C
Let X
1
, . . . , X
25
denote the 25 collision claims, and let
1
25
X = (X
1
+ . . . +X
25
) . We are
given that each X
i
(i = 1, . . . , 25) follows a normal distribution with mean 19,400 and
standard deviation 5000 . As a result X also follows a normal distribution with mean
19,400 and standard deviation
1
25
(5000) = 1000 . We conclude that P[ X > 20,000]
=
19, 400 20, 000 19, 400 19, 400
0.6
1000 1000 1000
X X
P P
⎡ ⎤ ⎡ ⎤ − − −
> = >
⎢ ⎥ ⎢ ⎥
⎣ ⎦ ⎣ ⎦
= 1 − Φ(0.6) = 1 – 0.7257
= 0.2743 .

82. Solution: B
Let X
1
, . . . , X
1250
be the number of claims filed by each of the 1250 policyholders.
We are given that each X
i
follows a Poisson distribution with mean 2 . It follows that
E[X
i
] = Var[X
i
] = 2 . Now we are interested in the random variable S = X
1
+ . . . + X
1250
.
Assuming that the random variables are independent, we may conclude that S has an
approximate normal distribution with E[S] = Var[S] = (2)(1250) = 2500 .
Therefore P[2450 < S < 2600] =
2450 2500 2500 2600 2500 2500
1 2
50 2500 2500 2500
2500 2500
2 1
50 50
S S
P P
S S
P P
− − − − ⎡ ⎤ ⎡ ⎤
< < = − < <
⎢ ⎥ ⎢ ⎥
⎣ ⎦ ⎣ ⎦
− − ⎡ ⎤ ⎡ ⎤
= < − < −
⎢ ⎥ ⎢ ⎥
⎣ ⎦ ⎣ ⎦
Then using the normal approximation with Z =
2500
50
S −
, we have P[2450 < S < 2600]
≈ P[Z < 2] – P[Z > 1] = P[Z < 2] + P[Z < 1] – 1 ≈ 0.9773 + 0.8413 – 1 = 0.8186 .

83. Solution: B
Let X
1
,…, X
n
denote the life spans of the n light bulbs purchased. Since these random
variables are independent and normally distributed with mean 3 and variance 1, the
random variable S = X
1
+ … + X
n
is also normally distributed with mean
3n μ =
and standard deviation
n σ =
Now we want to choose the smallest value for n such that
[ ]
3 40 3
0.9772 Pr 40 Pr
S n n
S
n n
− − ⎡ ⎤
≤ =
⎢ ⎥
⎣ ⎦
> >
This implies that n should satisfy the following inequality:
34 of 65
40 3
2
n
n
−
− ≥
To find such an n, let’s solve the corresponding equation for n:
( ) ( )
40 3
2
2 40 3
3 2 40 0
3 10 4 0
4
16
n
n
n n
n n
n n
n
n
−
− =
− = −
− − =
+ − =
=
=

84. Solution: B
Observe that
[ ] [ ] [ ]
[ ] [ ] [ ] [ ]
50 20 70
2 , 50 30 20 100
E X Y E X E Y
Var X Y Var X Var Y Cov X Y
+ = + = + =
+ = + + = + + =
for a randomly selected person. It then follows from the Central Limit Theorem that T is
approximately normal with mean
[ ] ( ) 100 70 7000 E T = =
and variance
[ ] ( )
2
100 100 100 Var T = =
Therefore,
[ ]
[ ]
7000 7100 7000
Pr 7100 Pr
100 100
Pr 1 0.8413
T
T
Z
− − ⎡ ⎤
< = <
⎢ ⎥
⎣ ⎦
= < =
where Z is a standard normal random variable.
35 of 65

85. Solution: B
Denote the policy premium by P . Since x is exponential with parameter 1000, it follows
from what we are given that E[X] = 1000, Var[X] = 1,000,000, [ ] Var X = 1000 and P =
100 + E[X] = 1,100 . Now if 100 policies are sold, then Total Premium Collected =
100(1,100) = 110,000
Moreover, if we denote total claims by S, and assume the claims of each policy are
independent of the others then E[S] = 100 E[X] = (100)(1000) and Var[S] = 100 Var[X]
= (100)(1,000,000) . It follows from the Central Limit Theorem that S is approximately
normally distributed with mean 100,000 and standard deviation = 10,000 . Therefore,
P[S ≥ 110,000] = 1 – P[S ≤ 110,000] = 1 –
110, 000 100, 000
10, 000
P Z
− ⎡ ⎤
≤
⎢ ⎥
⎣ ⎦
= 1 – P[Z ≤ 1] = 1
– 0.841 ≈ 0.159 .

86. Solution: E
Let
1 100
,..., X X denote the number of pensions that will be provided to each new recruit.
Now under the assumptions given,
( )( )
( )( )
0 with probability 1 0.4 0.6
1 with probability 0.4 0.25 0.1
2 with probability 0.4 0.75 0.3
i
X
⎧
− =
⎪
= =
⎨
⎪
=
⎩
for 1,...,100 i = . Therefore,
[ ] ( )( ) ( )( ) ( )( )
( ) ( ) ( ) ( ) ( ) ( )
[ ] [ ] { } ( )
2 2 2 2
2
2 2
0 0.6 1 0.1 2 0.3 0.7 ,
0 0.6 1 0.1 2 0.3 1.3 , and
Var 1.3 0.7 0.81
i
i
i i i
E X
E X
X E X E X
= + + =
⎡ ⎤
= + + =
⎣ ⎦
⎡ ⎤
= − = − =
⎣ ⎦
Since
1 100
,..., X X are assumed by the consulting actuary to be independent, the Central
Limit Theorem then implies that
1 100
... S X X = + + is approximately normally distributed
with mean
[ ] [ ] [ ] ( )
1 100
... 100 0.7 70 E S E X E X = + + = =
and variance
[ ] [ ] [ ] ( )
1 100
Var Var ... Var 100 0.81 81 S X X = + + = =
Consequently,
[ ]
[ ]
70 90.5 70
Pr 90.5 Pr
9 9
Pr 2.28
0.99
S
S
Z
− − ⎡ ⎤
≤ = ≤
⎢ ⎥
⎣ ⎦
= ≤
=
36 of 65

87. Solution: D
Let X denote the difference between true and reported age. We are given X is uniformly
distributed on (−2.5,2.5) . That is, X has pdf f(x) = 1/5, −2.5 < x < 2.5 . It follows that
x
μ = E[X] = 0
σ
x
2
= Var[X] = E[X
2
] =
2.5 2 3 3
2.5
2.5
2.5
2(2.5)
5 15 15
x x
dx
−
−
= =
∫
=2.083
σ
x
=1.443
Now
48
X , the difference between the means of the true and rounded ages, has a
distribution that is approximately normal with mean 0 and standard deviation
1.443
48
=
0.2083 . Therefore,
48
1 1 0.25 0.25
4 4 0.2083 0.2083
P X P Z
− ⎡ ⎤ ⎡ ⎤
− ≤ ≤ = ≤ ≤
⎢ ⎥ ⎢ ⎥
⎣ ⎦ ⎣ ⎦
= P[−1.2 ≤ Z ≤ 1.2] = P[Z ≤ 1.2] – P[Z ≤ –
1.2]
= P[Z ≤ 1.2] – 1 + P[Z ≤ 1.2] = 2P[Z ≤ 1.2] – 1 = 2(0.8849) – 1 = 0.77 .

88. Solution: C
Let X denote the waiting time for a first claim from a good driver, and let Y denote the
waiting time for a first claim from a bad driver. The problem statement implies that the
respective distribution functions for X and Y are
( )
/ 6
1 , 0
x
F x e x
−
= − > and
( )
/ 3
1 , 0
y
G y e y
−
= − >
Therefore,
( ) ( ) [ ] [ ]
( ) ( ) ( )( )
1/ 2 2 / 3 2 / 3 1/ 2 7 / 6
Pr 3 2 Pr 3 Pr 2
3 2 1 1 1
X Y X Y
F G e e e e e
− − − − −
≤ ∩ ≤ = ≤ ≤ ⎡ ⎤
⎣ ⎦
= = − − = − − +
37 of 65
89. Solution: B
We are given that
6
(50 ) for 0 50 50
( , ) 125, 000
0 otherwise
x y x y
f x y
⎧
− − < < − <
⎪
=
⎨
⎪
⎩
and we want to determine P[X > 20 ∩ Y > 20] . In order to determine integration limits,
consider the following diagram:
y
x
50
50
(20, 30)
(30, 20)
x>20 y>20
We conclude that P[X > 20 ∩ Y > 20] =
30 50
20 20
6
(50 )
125, 000
x
x y
−
− −
∫ ∫
dy dx .

90. Solution: C
Let T
1
be the time until the next Basic Policy claim, and let T
2
be the time until the next
Deluxe policy claim. Then the joint pdf of T
1
and T
2
is
1 2 1 2
/ 2 / 3 / 2 / 3
1 2
1 1 1
( , )
2 3 6
t t t t
f t t e e e e
− − − −
⎛ ⎞⎛ ⎞
= =
⎜ ⎟⎜ ⎟
⎝ ⎠⎝ ⎠
, 0 < t
1
< ∞, 0 < t
2
< ∞ and we need to find
P[T
2
< T
1
] =
1
1
1 2 1 2
/ 2 / 3 / 2 / 3
2 1 1
0 0 0 0
1 1
6 2
t
t
t t t t
e e dt dt e e dt
∞ ∞
− − − −
⎡ ⎤
= −
⎢ ⎥
⎣ ⎦
∫ ∫ ∫
=
1 1 1 1 1
/ 2 / 2 / 3 / 2 5 / 6
1 1
0 0
1 1 1 1
2 2 2 2
t t t t t
e e e dt e e dt
∞ ∞
− − − − −
⎡ ⎤ ⎡ ⎤
− = −
⎢ ⎥ ⎢ ⎥
⎣ ⎦ ⎣ ⎦
∫ ∫
=
1 1
/ 2 5 / 6
0
3 3 2
1
5 5 5
t t
e e
∞
− −
⎡ ⎤
− + = − =
⎢ ⎥
⎣ ⎦
= 0.4 .

91. Solution: D
We want to find P[X + Y > 1] . To this end, note that P[X + Y > 1]
=
2
1 2 1
2
1
0 1 0
2 2 1 1 1
4 2 2 8 x
x
x y
dydx xy y y dx
−
−
+ − ⎡ ⎤ ⎡ ⎤
= + −
⎢ ⎥ ⎢ ⎥
⎣ ⎦ ⎣ ⎦
∫ ∫ ∫
=
1
2
0
1 1 1 1
1 (1 ) (1 ) (1 )
2 2 2 8
x x x x x dx
⎡ ⎤
+ − − − − − + −
⎢ ⎥
⎣ ⎦
∫
=
1
2 2
0
1 1 1 1
2 8 4 8
x x x x dx
⎡ ⎤
+ + − +
⎢ ⎥
⎣ ⎦
∫
=
1
2
0
5 3 1
8 4 8
x x dx
⎡ ⎤
+ +
⎢ ⎥
⎣ ⎦
∫
=
1
3 2
0
5 3 1
24 8 8
x x x
⎡ ⎤
+ +
⎢ ⎥
⎣ ⎦
=
5 3 1 17
24 8 8 24
+ + =
38 of 65
92. Solution: B
Let X and Y denote the two bids. Then the graph below illustrates the region over which
X and Y differ by less than 20:
Based on the graph and the uniform distribution:
( )
( )
( )
2
2
2 2
2
2
2
1
200 2 180
Shaded Region Area
2
Pr 20
200
2200 2000
180
1 1 0.9 0.19
200
X Y
− ⋅
⎡ − < ⎤ = =
⎣ ⎦
−
= − = − =
More formally (still using symmetry)
[ ]
( ) ( )
2200 20 2200
20
2000
2 2
2020 2000 2020
2200
2
2200
2020 2 2
2020
2
Pr 20 1 Pr 20 1 2Pr 20
1 1
1 2 1 2
200 200
2 1
1 20 2000 1 2020
200 200
180
1 0.19
200
x
x
X Y X Y X Y
dydx y dx
x dx x
−
−
⎡ − < ⎤ = − ⎡ − ≥ ⎤ = − − ≥
⎣ ⎦ ⎣ ⎦
= − = −
= − − − = − −
⎛ ⎞
= − =
⎜ ⎟
⎝ ⎠
∫ ∫ ∫
∫
39 of 65

93. Solution: C
Define X and Y to be loss amounts covered by the policies having deductibles of 1 and 2,
respectively. The shaded portion of the graph below shows the region over which the
total benefit paid to the family does not exceed 5:
We can also infer from the graph that the uniform random variables X and Y have joint
density function ( )
1
, , 0 10 , 0 10
100
f x y x y = < < < <
We could integrate f over the shaded region in order to determine the desired probability.
However, since X and Y are uniform random variables, it is simpler to determine the
portion of the 10 x 10 square that is shaded in the graph above. That is,
( )
( ) ( ) ( )
( )( ) ( )( ) ( )( )( )
Pr Total Benefit Paid Does not Exceed 5
Pr 0 6, 0 2 Pr 0 1, 2 7 Pr 1 6, 2 8
6 2 1 5 1 2 5 5
12 5 12.5
0.295
100 100 100 100 100 100
X Y X Y X Y X = < < < < + < < < < + < < < < −
= + + = + + =

94. Solution: C
Let ( )
1 2
, f t t denote the joint density function of
1 2
and T T . The domain of f is pictured
below:
Now the area of this domain is given by
( )
2
2
1
6 6 4 36 2 34
2
A = − − = − =
40 of 65
Consequently, ( )
1 2 1 2
1 2
1
, 0 6 , 0 6 , 10
, 34
0 elsewhere
t t t t
f t t
⎧
< < < < + <
⎪
=
⎨
⎪
⎩
and
[ ] [ ] [ ] [ ]
( )
1
1
1 2 1 2 1
4 6 6 10 4 6
10 6 2 2
1 2 1 1 2 1 1 0 1 1 0 1
0 0 4 0 0 4
2
4 6
2 4 2 3 1 1
1 1 1 1 0 1 1
0 4
2 (due to symmetry)
1 1
2 2
34 34 34 34
3 3 1 1 1
2 10 2 5
17 34 34 34 3
t
t
E T T E T E T E T
t t
t dt dt t dt dt t dt t dt
t t
dt t t dt t t
−
−
+ = + =
⎧ ⎫ ⎡ ⎤ ⎡ ⎤ ⎧ ⎫
= + = +
⎨ ⎬ ⎨ ⎬
⎢ ⎥ ⎢ ⎥
⎩ ⎭ ⎣ ⎦ ⎣ ⎦ ⎩ ⎭
⎧ ⎫ ⎛
= + − = + −
⎨ ⎬
⎜
⎝ ⎩ ⎭
∫ ∫ ∫ ∫ ∫ ∫
∫ ∫
6
4
24 1 64
2 180 72 80 5.7
17 34 3
⎧ ⎫
⎞
⎨ ⎬
⎟
⎠
⎩ ⎭
⎧ ⎫ ⎡ ⎤
= + − − + =
⎨ ⎬
⎢ ⎥
⎣ ⎦ ⎩ ⎭

95. Solution: E
( )
( ) ( ) ( ) ( )
( ) ( )
( ) ( ) ( ) ( )
1 2 1 2 1 2 1 2
2 2 2 2 2 2
2 2
1 2 1 2 1 1 2 2 1 1 2 2
1 2 1 2 1 2
1 2
1 1 1 1
2 2
2 2 2 2
,
t X Y t Y X t t X t t Y t W t Z
t t t t t t t t t t t t
t t X t t Y t t
M t t E e E e E e e
E e E e e e e e e
+ + − − + +
− + − + + +
− + +
⎡ ⎤ ⎡ ⎤
⎡ ⎤ = = =
⎣ ⎦
⎣ ⎦ ⎣ ⎦
⎡ ⎤ ⎡ ⎤
= = = =
⎣ ⎦ ⎣ ⎦

96. Solution: E
Observe that the bus driver collect 21x50 = 1050 for the 21 tickets he sells. However, he
may be required to refund 100 to one passenger if all 21 ticket holders show up. Since
passengers show up or do not show up independently of one another, the probability that
all 21 passengers will show up is ( ) ( )
21 21
1 0.02 0.98 0.65 − = = . Therefore, the tour
operator’s expected revenue is ( ) ( ) 1050 100 0.65 985 − = .
41 of 65
97. Solution: C
We are given f(t
1
, t
2
) = 2/L
2
, 0 ≤ t
1
≤ t
2
≤ L .
Therefore, E[T
1
2
+ T
2
2
] =
2
2 2
1 2 1 2
2
0 0
2
( )
t L
t t dt dt
L
+
∫ ∫
=
2 3 3
2 3
1 2
2 1 1 2 2
2 2
0 0
0
2 2
3 3
t
L L
t t
t t dt t dt
L L
⎧ ⎫ ⎧ ⎫ ⎡ ⎤ ⎛ ⎞
⎪ ⎪ ⎪ ⎪
+ = +
⎜ ⎟ ⎨ ⎬ ⎨ ⎬ ⎢ ⎥
⎪ ⎪ ⎪ ⎪ ⎣ ⎦ ⎝ ⎠ ⎩ ⎭ ⎩ ⎭
∫ ∫
=
4
3 2 2
2 2 2 2
0
0
2 4 2 2
3 3 3
L L
t
t dt L
L L
⎡ ⎤
= =
⎢ ⎥
⎣ ⎦
∫
t
2
( ) L, L
t
1

98. Solution: A
Let g(y) be the probability function for Y = X
1
X
2
X
3
. Note that Y = 1 if and only if
X
1
= X
2
= X
3
= 1 . Otherwise, Y = 0 . Since P[Y = 1] = P[X
1
= 1 ∩ X
2
= 1 ∩ X
3
= 1]
= P[X
1
= 1] P[X
2
= 1] P[X
3
= 1] = (2/3)
3
= 8/27 .
We conclude that
19
for 0
27
8
( ) for 1
27
0 otherwise
y
g y y
⎧
=
⎪
⎪
⎪
= =
⎨
⎪
⎪
⎪
⎩
and M(t) =
19 8
27 27
t
y t
E e e ⎡ ⎤ = +
⎣ ⎦
42 of 65
99. Solution: C
( ) ( ) ( ) ( )
( ) ( ) ( ) ( )
( ) ( ) ( )
( )
2
We use the relationships Var Var , Cov , Cov , , and
Var Var Var 2 Cov , . First we observe
17, 000 Var 5000 10, 000 2 Cov , , and so Cov , 1000.
We want to find Var 100 1.1 V
aX b a X aX bY ab X Y
X Y X Y X Y
X Y X Y X Y
X Y
+ = =
+ = + +
= + = + + =
+ + = ⎡ ⎤
⎣ ⎦
( )
[ ] ( ) ( )
( ) ( ) ( )
2
ar 1.1 100
Var 1.1 Var Var 1.1 2 Cov ,1.1
Var 1.1 Var 2 1.1 Cov , 5000 12,100 2200 19, 300.
X Y
X Y X Y X Y
X Y X Y
+ + ⎡ ⎤
⎣ ⎦
= + = + + ⎡ ⎤
⎣ ⎦
= + + = + + =

100. Solution: B
Note
P(X = 0) = 1/6
P(X = 1) = 1/12 + 1/6 = 3/12
P(X = 2) = 1/12 + 1/3 + 1/6 = 7/12 .
E[X] = (0)(1/6) + (1)(3/12) + (2)(7/12) = 17/12
E[X
2
] = (0)
2
(1/6) + (1)
2
(3/12) + (2)
2
(7/12) = 31/12
Var[X] = 31/12 – (17/12)
2
= 0.58 .

101. Solution: D
Note that due to the independence of X and Y
Var(Z) = Var(3X − Y − 5) = Var(3X) + Var(Y) = 3
2
Var(X) + Var(Y) = 9(1) + 2 = 11 .

102. Solution: E
Let X and Y denote the times that the two backup generators can operate. Now the
variance of an exponential random variable with mean
2
is β β . Therefore,
[ ] [ ]
2
Var Var 10 100 X Y = = =
Then assuming that X and Y are independent, we see
[ ] [ ] [ ] Var X+Y Var X Var Y 100 100 200 = + = + =
43 of 65
103. Solution: E
Let
1 2 3
, , and X X X denote annual loss due to storm, fire, and theft, respectively. In
addition, let ( )
1 2 3
, , Y Max X X X = .
Then
[ ] [ ] [ ] [ ] [ ]
( )
( )( )
( )( )
( )
1 2 3
3 3
3
1.5 2.4
5
3 2
4
Pr 3 1 Pr 3 1 Pr 3 Pr 3 Pr 3
1 1 1 1
1 1 1 1
0.414
Y Y X X X
e e e
e e e
− −
−
−
− −
> = − ≤ = − ≤ ≤ ≤
= − − − −
= − − − −
=
*
* Uses that if X has an exponential distribution with mean μ
( ) ( ) ( )
1
Pr 1 Pr 1 1 1
t t x
x
x
X x X x e dt e e
μ μ μ
μ
∞
− − ∞ −
≤ = − ≥ = − = − − = −
∫

104. Solution: B
Let us first determine k:
1 1 1 1
2 1
0
0 0 0 0
1
1
2 2 2
2
k k
kxdxdy kx dy dy
k
= = = =
=
∫ ∫ ∫ ∫

Then
[ ]
[ ]
[ ]
[ ] [ ] [ ] [ ]
1 1
1
2 2 3 1
0
0
0 0
1 1
1
2 1
0
0
0 0
1 1 1 1
2 3 1
0
0 0 0 0
2 1
0
2 2
2 2
3 3
1 1
2
2 2
2 2
2
3 3
2 2 1
6 6 3
1 2 1 1 1
Cov , 0
3 3 2 3 3
E X x dydx x dx x
E Y y x dxdy ydy y
E XY x ydxdy x y dy ydy
y
X Y E XY E X E Y
= = = =
= = = =
= = =
= = =
⎛ ⎞⎛ ⎞
= − = − = − =
⎜ ⎟⎜ ⎟
⎝ ⎠⎝ ⎠
∫ ∫ ∫
∫ ∫ ∫
∫ ∫ ∫ ∫




(Alternative Solution)
Define g(x) = kx and h(y) = 1 . Then
f(x,y) = g(x)h(x)
In other words, f(x,y) can be written as the product of a function of x alone and a function
of y alone. It follows that X and Y are independent. Therefore, Cov[X, Y] = 0 .
44 of 65
105. Solution: A
The calculation requires integrating over the indicated region.
( ) ( )
( ) ( )
( ) ( )
2 1
1 2 1 1 1
2 2 2 2 2 2 4 5
0 0 0 0
0
2 1
1 2 1 1 1
2 3 3 3 4 5
0 0 0 0
0
2
1 2 1
2 2 2 3 2 3 3 5
0 0
8 4 4 4 4
4 4
3 3 3 5 5
8 8 8 56 56 56
8
3 9 9 9 45 45
8 8 8 56
8
3 9 9 9
x
x
x
x
x
x
x
x
x
x
x
x
E X x y dy dx x y dx x x x dx x dx x
E Y xy dy dx xy dy dx x x x dx x dx x
E XY x y dy dx x y dx x x x dx x d
= = = − = = =
= = = − = = =
= = = − =
∫ ∫ ∫ ∫ ∫
∫ ∫ ∫ ∫ ∫
∫ ∫ ∫
( ) ( ) ( ) ( )
1 1
0 0
56 28
54 27
28 56 4
Cov , 0.04
27 45 5
x
X Y E XY E X E Y
= =
⎛ ⎞⎛ ⎞
= − = − =
⎜ ⎟⎜ ⎟
⎝ ⎠⎝ ⎠
∫ ∫

106. Solution: C
The joint pdf of X and Y is f(x,y) = f
2
(yx) f
1
(x)
= (1/x)(1/12), 0 < y < x, 0 < x < 12 .
Therefore,
E[X] =
12 12 12 2
12
0 0
0 0 0 0
1
12 12 12 24
x
x
y x x
x dydx dx dx
x
⋅ = = =
∫ ∫ ∫ ∫
= 6
E[Y] =
12 12 12 2 2
12
0
0 0 0 0 0
144
12 24 24 48 48
x
x
y y x x
dydx dx dx
x x
⎡ ⎤
= = = =
⎢ ⎥
⎣ ⎦
∫ ∫ ∫ ∫
= 3
E[XY] =
12 12 12 2 2 3 3
12
0
0 0 0 0 0
(12)
12 24 24 72 72
x
x
y y x x
dydx dx dx
⎡ ⎤
= = = =
⎢ ⎥
⎣ ⎦
∫ ∫ ∫ ∫
= 24
Cov(X,Y) = E[XY] – E[X]E[Y] = 24 − (3)(6) = 24 – 18 = 6 .
45 of 65
107. Solution: A
( ) ( )
( ) ( ) ( ) ( )
( ) ( )
( )
( ) ( ) ( )
( )
1 2
2
2 2
2
Cov , Cov , 1.2
Cov , Cov , Cov ,1.2 Cov Y,1.2Y
Var Cov , 1.2Cov , 1.2Var
Var 2.2Cov , 1.2Var
Var 27.4 5 2.4
Var
C C X Y X Y
X X Y X X Y
X X Y X Y Y
X X Y Y
X E X E X
Y E Y
= + +
= + + +
= + + +
= + +
= − = − =
= ( ) ( )
( ) ( )
( ) ( ) ( ) ( )
( ) ( ) ( )
2
2
1 2
51.4 7 2.4
Var Var Var 2Cov ,
1 1
Cov , Var Var Var 8 2.4 2.4 1.6
2 2
Cov , 2.4 2.2 1.6 1.2 2.4 8.8
E Y
X Y X Y X Y
X Y X Y X Y
C C
− = − =
+ = + +
= + − − = − − =
= + + =

107. Alternate solution:
We are given the following information:
[ ]
[ ]
[ ]
1
2
2
2
1.2
5
27.4
7
51.4
Var 8
C X Y
C X Y
E X
E X
E Y
E Y
X Y
= +
= +
=
⎡ ⎤ =
⎣ ⎦
=
⎡ ⎤ =
⎣ ⎦
+ =
Now we want to calculate
( ) ( )
( )( ) [ ] [ ]
[ ] [ ] ( ) [ ] [ ] ( )
[ ] ( ) ( ) ( )
1 2
2 2
2 2
Cov , Cov , 1.2
1.2 1.2
2.2 1.2 1.2
2.2 1.2 5 7 5 1.2 7
27.
C C X Y X Y
E X Y X Y E X Y E X Y
E X XY Y E X E Y E X E Y
E X E XY E Y
= + +
= + + − + + ⎡ ⎤
⎣ ⎦
⎡ ⎤ = + + − + +
⎣ ⎦
⎡ ⎤ ⎡ ⎤ = + + − + +
⎣ ⎦ ⎣ ⎦
=
i
[ ] ( ) ( )( )
[ ]
4 2.2 1.2 51.4 12 13.4
2.2 71.72
E XY
E XY
+ + −
= −
Therefore, we need to calculate
[ ]
E XY first. To this end, observe
46 of 65
[ ] ( ) [ ] ( )
[ ] [ ] ( )
[ ] ( )
[ ]
[ ]
[ ]
2 2
2
2 2
2
2 2
8 Var
2
2 5 7
27.4 2 51.4 144
2 65.2
X Y E X Y E X Y
E X XY Y E X E Y
E X E XY E Y
E XY
E XY
E XY
⎡ ⎤
= + = + − +
⎣ ⎦
⎡ ⎤ = + + − +
⎣ ⎦
⎡ ⎤ ⎡ ⎤ = + + − +
⎣ ⎦ ⎣ ⎦
= + + −
= −
( ) 8 65.2 2 36.6 = + =
Finally,
( ) ( )
1, 2
Cov 2.2 36.6 71.72 8.8 C C = − =

108. Solution: A
The joint density of
1 2
and T T is given by
( )
1 2
1 2 1 2
, , 0 , 0
t t
f t t e e t t
− −
= > >
Therefore,
[ ] [ ]
( ) ( )
2 2
1 2 2 1
2 2
2 2
2
2
1 2
1 1
2 2
1 2 2
0 0 0
0
1 1 1 1
2 2 2 2
2 2
0 0
1 1 1 1 1
2 2 2 2 2
0
Pr Pr 2
1
2 2 1 2
1 2
x t x x t x
t t t t
x t x t x x
t t
x t x x x
t x x
x
X x T T x
e e dt dt e e dt
e e dt e e e dt
e e e e e e e
e
− −
− − − −
− + − −
− −
− − − − −
− −
−
≤ = + ≤
⎡ ⎤
= = −
⎢ ⎥
⎢ ⎥
⎣ ⎦
⎡ ⎤ ⎛ ⎞
= − = −
⎜ ⎟ ⎢ ⎥
⎣ ⎦ ⎝ ⎠
⎡ ⎤
= − + = − + + −
⎢ ⎥
⎣ ⎦
= − +
∫ ∫ ∫
∫ ∫
1 1
2 2
2 1 2 , 0
x x
x x
e e e e x
− −
− −
− = − + >
It follows that the density of X is given by
( )
1 1
2 2
1 2 , 0
x x
x x
d
g x e e e e x
dx
− −
− −
⎡ ⎤
= − + = − >
⎢ ⎥
⎣ ⎦
47 of 65
109. Solution: B
Let
u be annual claims,
v be annual premiums,
g(u, v) be the joint density function of U and V,
f(x) be the density function of X, and
F(x) be the distribution function of X.
Then since U and V are independent,
( ) ( )
/ 2 / 2
1 1
, , 0 , 0
2 2
u v u v
g u v e e e e u v
− − − −
⎛ ⎞
= = ∞ ∞
⎜ ⎟
⎝ ⎠
< < < <
and
( ) [ ] [ ]
( )
( )
( )
/ 2
0 0 0 0
/ 2 / 2 / 2
0
0 0
1/ 2 / 2
0
1/ 2
Pr Pr Pr
1
,
2
1 1 1
2 2 2
1 1
2 2
1
2 1
vx vx
u v
u v vx vx v v
v x v
v x v
u
F x X x x U Vx
v
g u v dudv e e dudv
e e dv e e e dv
e e dv
e e
x
∞ ∞
− −
∞ ∞
− − − − −
∞
− + −
− + −
⎡ ⎤
= ≤ = ≤ = ≤
⎢ ⎥
⎣ ⎦
= =
⎛ ⎞
= − = − +
⎜ ⎟
⎝ ⎠
⎛ ⎞
= − +
⎜ ⎟
⎝ ⎠
= −
+
∫ ∫ ∫ ∫
∫ ∫
∫

/ 2
0
1
1
2 1 x
∞
⎡ ⎤
= − +
⎢ ⎥
+
⎣ ⎦
Finally, ( ) ( )
( )
2
2
'
2 1
f x F x
x
= =
+

110. Solution: C
Note that the conditional density function
( )
( )
1 3,
1 2
, 0 ,
3 1 3 3
x
f y
f y x y
f
⎛ ⎞
= = < <
⎜ ⎟
⎝ ⎠
( )
2 3
2 3 2 3
2
0 0
0
1 16
24 1 3 8 4
3 9
x
f y dy y dy y
⎛ ⎞
= = = =
⎜ ⎟
⎝ ⎠
∫ ∫
It follows that ( )
1 9 9 2
1 3, , 0
3 16 2 3
f y x f y y y
⎛ ⎞
= = = < <
⎜ ⎟
⎝ ⎠
Consequently,
1 3
1 3
2
0
0
9 9 1
Pr 1 3
2 4 4
Y X X y dy y ⎡ < = ⎤ = = =
⎣ ⎦ ∫
48 of 65
111. Solution: E
( )
( )
( )
( )
( )
( )
3
1
4 1 2 1 3
3 2
1 1
3
3
3
1
2
1
2,
Pr 1 3 2
2
2 1
2,
4 2 1 2
1 1 1
2
2 4 4
1
1 8
2
Finally, Pr 1 3 2 1
1
9 9
4
x
x
f y
Y X dy
f
f y y y
f y dy y
y dy
Y X y
− − − −
∞
∞
− −
−
−
⎡ < < = ⎤ =
⎣ ⎦
= =
−
= = − =
⎡ < < = ⎤ = = − = − =
⎣ ⎦
∫
∫
∫

112. Solution: D
We are given that the joint pdf of X and Y is f(x,y) = 2(x+y), 0 < y < x < 1 .
Now f
x
(x) =
2
0
0
(2 2 ) 2
x
x
x y dy xy y ⎡ ⎤ + = +
⎣ ⎦ ∫
= 2x
2
+ x
2
= 3x
2
, 0 < x < 1
so f(yx) =
2 2
( , ) 2( ) 2 1
( ) 3 3
x
f x y x y y
f x x x x
+ ⎛ ⎞
= = +
⎜ ⎟
⎝ ⎠
, 0 < y < x
f(yx = 0.10) = [ ]
2 1 2
10 100
3 0.1 0.01 3
y
y
⎡ ⎤
+ = +
⎢ ⎥
⎣ ⎦
, 0 < y < 0.10
P[Y < 0.05X = 0.10] = [ ]
0.05
0.05
2
0 0
2 20 100 1 1 5
10 100
3 3 3 3 12 12
y dy y y
⎡ ⎤
+ = + = + =
⎢ ⎥
⎣ ⎦
∫
= 0.4167 .

113. Solution: E
Let
W = event that wife survives at least 10 years
H = event that husband survives at least 10 years
B = benefit paid
P = profit from selling policies
Then
[ ] [ ] Pr Pr 0.96 0.01 0.97
c
H P H W H W ⎡ ⎤ = ∩ + ∩ = + =
⎣ ⎦
and
[ ]
[ ]
[ ]
[ ]
Pr
0.96
Pr 0.9897
Pr 0.97
Pr
0.01
Pr 0.0103
Pr 0.97
c
c
W H
W H
H
H W
W H
H
∩
= = =
⎡ ⎤ ∩
⎣ ⎦
⎡ ⎤ = = =
⎣ ⎦


49 of 65
It follows that
[ ] [ ] [ ] ( ) [ ] ( )
{ }
( )
1000 1000 1000 0 Pr 10, 000 Pr
1000 10, 000 0.0103 1000 103 897
c
E P E B E B W H W H ⎡ ⎤ = − = − = − +
⎣ ⎦
= − = − =
 

114. Solution: C
Note that
P(Y = 0⏐X = 1) =
( 1, 0) ( 1, 0) 0.05
( 1) ( 1, 0) ( 1, 1) 0.05 0.125
P X Y P X Y
P X P X Y P X Y
= = = =
= =
= = = + = = +
= 0.286
P(Y = 1⏐X=1) = 1 – P(Y = 0 ⏐ X = 1) = 1 – 0.286 = 0.714
Therefore, E(Y⏐X = 1) = (0) P(Y = 0⏐X = 1) + (1) P(Y = 1⏐X = 1) = (1)(0.714) = 0.714
E(Y
2
⏐X = 1) = (0)
2
P(Y = 0⏐X = 1) + (1)
2
P(Y = 1⏐X = 1) = 0.714
Var(Y⏐X = 1) = E(Y
2
⏐X = 1) – [E(Y⏐X = 1)]
2
= 0.714 – (0.714)
2
= 0.20

115. Solution: A
Let f
1
(x) denote the marginal density function of X. Then
( ) ( )
1
1
1
2 2 2 1 2 , 0 1
x
x
x
x
f x xdy xy x x x x x
+
+
= = = + − =
∫
 < <
Consequently,
( )
( )
( )
[ ] ( )
( )
[ ] [ ] { }
1
1
2
2 1 2 2 2
1
3
2 2 3 1 3
3 2 3 2
2
2 2
1 if: 1 ,
0 otherwise
1 1 1 1 1 1 1
1
2 2 2 2 2 2 2
1 1 1
1
3 3 3
1 1 1 1
3 3 3 3
Var
x
x
x
x
x
x
x
x
x y x f x y
f y x
f x
E Y X ydy y x x x x x x
E Y X y dy y x x
x x x x x x
Y X E Y X E Y X x
+
+
+
+
+ ⎧
= =
⎨
⎩
= = = + − = + + − = +
⎡ ⎤ = = = + −
⎣ ⎦
= + + + − = + +
⎡ ⎤ = − =
⎣ ⎦
∫
∫
< <

 
 
  
2
2 2
1 1
3 2
1 1 1
3 4 12
x x
x x x x
⎛ ⎞
+ + − +
⎜ ⎟
⎝ ⎠
= + + − − − =
50 of 65
116. Solution: D
Denote the number of tornadoes in counties P and Q by N
P
and N
Q
, respectively. Then
E[N
Q
N
P
= 0]
= [(0)(0.12) + (1)(0.06) + (2)(0.05) + 3(0.02)] / [0.12 + 0.06 + 0.05 + 0.02] = 0.88
E[N
Q
2
N
P
= 0]
= [(0)
2
(0.12) + (1)
2
(0.06) + (2)
2
(0.05) + (3)
2
(0.02)] / [0.12 + 0.06 + 0.05 + 0.02]
= 1.76 and Var[N
Q
N
P
= 0] = E[N
Q
2
N
P
= 0] – {E[N
Q
N
P
= 0]}
2
= 1.76 – (0.88)
2
= 0.9856 .

117. Solution: C
The domain of X and Y is pictured below. The shaded region is the portion of the domain
over which X<0.2 .
Now observe
[ ] ( )
( ) ( ) ( ) ( )
( ) ( ) ( )
1
0.2 1 0.2
2
0 0 0
0
0.2 0.2
2 2 2
0 0
0.2
2 3 3
0.2
0
0
1
Pr 0.2 6 1 6
2
1 1
6 1 1 1 6 1 1
2 2
1
6 1 1 0.8 1 0.488
2
x
x
X x y dydx y xy y dx
x x x x dx x x dx
x dx x
−
−
⎡ ⎤
= − + = − − ⎡ ⎤
⎣ ⎦ ⎢ ⎥
⎣ ⎦
⎡ ⎤ ⎡ ⎤
= − − − − − = − − −
⎢ ⎥ ⎢ ⎥
⎣ ⎦ ⎣ ⎦
= − = − − = − + =
∫ ∫ ∫
∫ ∫
∫
<


118. Solution: E
The shaded portion of the graph below shows the region over which ( ) , f x y is nonzero:
We can infer from the graph that the marginal density function of Y is given by
( )
( ) ( )
3 2 1 2
15 15 15 15 1 , 0 1
y
y
y
y
g y y dx xy y y y y y y = = = − = − < <
∫
51 of 65
or more precisely, ( )
( )
1 2
3 2
15 1 , 0 1
0 otherwise
y y y
g y
⎧
− < < ⎪
=
⎨
⎪
⎩

119. Solution: D
The diagram below illustrates the domain of the joint density ( ) , of and f x y X Y .
We are told that the marginal density function of X is ( ) 1 , 0 1
x
f x x = < <
while
( )
1 , 1
y x
f y x x y x = < < +
It follows that ( ) ( ) ( )
1 if 0 1 , 1
,
0 otherwise
x
y x
x x y x
f x y f x f y x
< < < < + ⎧
= =
⎨
⎩
Therefore,
[ ] [ ]
1 1
2 2
0
1 1
1 1
2 2 2
2 2
0
0 0
Pr 0.5 1 Pr 0.5 1
1 1 1 1 1 7
1 1 1 1
2 2 2 4 8 8
x
x
Y Y dydx
y dx x dx x x
> = − ≤ = −
⎛ ⎞ ⎡ ⎤
= − = − − = − − = − + =
⎜ ⎟
⎢ ⎥
⎝ ⎠ ⎣ ⎦
∫ ∫
∫ ∫
[Note since the density is constant over the shaded parallelogram in the figure the
solution is also obtained as the ratio of the area of the portion of the parallelogram above
0.5 y = to the entire shaded area.]
52 of 65
120. Solution: A
We are given that X denotes loss. In addition, denote the time required to process a claim
by T.
Then the joint pdf of X and T is
2
3 1 3
, 2 , 0 2
( , ) 8 8
0, otherwise.
x x x t x x
f x t x
⎧
⋅ = < < ≤ ≤
⎪
=
⎨
⎪
⎩
Now we can find P[T ≥ 3] =
4 2 4 4 2 4
2 2 3
/ 2 3 3 / 2 3 3
3 3 12 3 12 1 12 36 27
1
8 16 16 64 16 64 4 16 64
t t
xdxdt x dt t dt t
⎡ ⎤ ⎛ ⎞ ⎡ ⎤ ⎛ ⎞
= = − = − = − − −
⎜ ⎟ ⎜ ⎟
⎢ ⎥ ⎢ ⎥
⎣ ⎦ ⎝ ⎠ ⎣ ⎦ ⎝ ⎠
∫ ∫ ∫ ∫
= 11/64 = 0.17 .
t
x
1 2
3
4
1
2
t = x
t = 2x

121. Solution: C
The marginal density of X is given by
( ) ( )
1
3
1
2
0
0
1 1 1
10 10 10
64 64 3 64 3
x
xy x
f x xy dy y
⎛ ⎞
⎛ ⎞
= − = − = −
⎜ ⎟ ⎜ ⎟
⎝ ⎠
⎝ ⎠
∫
Then
2
10 10
2 2
1
( ) f ( ) 10
64 3
x
x
E X x x dx x dx
⎛ ⎞
= = −
⎜ ⎟
⎝ ⎠
∫ ∫
=
10
3
2
2
1
5
64 9
x
x
⎛ ⎞
−
⎜ ⎟
⎝ ⎠
=
1 1000 8
500 20
64 9 9
⎡ ⎤ ⎛ ⎞ ⎛ ⎞
− − −
⎜ ⎟ ⎜ ⎟ ⎢ ⎥
⎝ ⎠ ⎝ ⎠ ⎣ ⎦
= 5.778
53 of 65
122. Solution: D
The marginal distribution of Y is given by f
2
(y) =
0
6
y
∫
e
–x
e
–2y
dx = 6 e
–2y
0
y
x
e
−
∫
dx
= −6 e
–2y
e
–y
+ 6e
–2y
= 6 e
–2y
– 6 e
–3y
, 0 < y < ∞
Therefore, E(Y) =
0
y
∞
∫
f
2
(y) dy =
2 3
0
(6 6 )
y y
ye ye
∞
− −
−
∫
dy = 6
2
0
y
ye
∞
−
∫
dy – 6
0
y
∞
∫
e
–3y
dy =
0
6
2
2
∞
∫
ye
–2y
dy −
0
6
3
3
∞
∫
y e
–3y
dy
But
0
2
∞
∫
y e
–2y
dy and
0
3
∞
∫
y e
–3y
dy are equivalent to the means of exponential random
variables with parameters 1/2 and 1/3, respectively. In other words,
0
2
∞
∫
y e
–2y
dy = 1/2
and
0
3
∞
∫
y e
–3y
dy = 1/3 . We conclude that E(Y) = (6/2) (1/2) – (6/3) (1/3) = 3/2 – 2/3 =
9/6 − 4/6 = 5/6 = 0.83 .

123. Solution: C
Observe
[ ] [ ] [ ]
( ) ( )
8 4 1
1
5 5 2
Pr 4 8 Pr 4 8 1 Pr 1 Pr 4 8 1 Pr 1
1 1
3 6
0.122
S S N N S N N
e e e e
− − −
−
< < = ⎡ < < = ⎤ = + ⎡ < < > ⎤ >
⎣ ⎦ ⎣ ⎦
= − + −
=
*
*Uses that if X has an exponential distribution with mean μ
( ) ( ) ( )
1 1
Pr Pr Pr
b a
t t
a b
a X b X a X b e dt e dt e e
μ
μ μ μ
μ μ
−
∞ ∞
−
− −
≤ ≤ = ≥ − ≥ = − = −
∫ ∫
54 of 65
124. Solution: A
Because f(x,y) can be written as
y x
e e y f x f
2
2 ) ( ) (
− −
= and the support of f(x,y) is a cross
product, X and Y are independent. Thus, the condition on X can be ignored and it suffices
to just consider
y
e y f
2
2 ) (
−
= .
Because of the memoryless property of the exponential distribution, the conditional
density of Y is the same as the unconditional density of Y+3.
Because a location shift does not affect the variance, the conditional variance of Y is
equal to the unconditional variance of Y.
Because the mean of Y is 0.5 and the variance of an exponential distribution is always
equal to the square of its mean, the requested variance is 0.25.

125. Solution: E
The support of (X,Y) is 0 < y < x < 1.
2 ) ( )  ( ) , (
,
= = x f x y f y x f
X Y X
on that support. It is clear geometrically
(a flat joint density over the triangular region 0 < y < x < 1) that when Y = y
we have X ~ U(y, 1) so that 1
1
1
)  ( < <
−
= x y for
y
y x f .
By computation:
1
1
1
2 2
2
) (
) , (
)  ( 2 2 2 ) (
1
,
< <
−
=
−
= = ⇒ − = =
∫
x y for
y y y f
y x f
y x f y dx y f
y
Y
Y X
Y
55 of 65
126. Solution: C
Using the notation of the problem, we know that
0 1
2
5
p p + = and
0 1 2 3 4 5
1 p p p p p p + + + + + = .
Let
1 n n
p p c
+
− = for all 4 n ≤ . Then
0
for 1 5
n
p p nc n = − ≤ ≤ .
Thus ( ) ( ) ( ) . 1 15 6 5 2
0 0 0 0 0
= − = − + + − + − + c p c p c p c p p ...
Also ( )
0 1 0 0 0
2
2
5
p p p p c p c + = + − = − = . Solving simultaneously
0
0
6 15 1
2
2
5
p c
p c
− = ⎧
⎪
⎨
− =
⎪
⎩
⇒
0
0
6
6 3
5
6 15 1
1
12
5
p c
p c
c
− =
− + = −
=
. So
0
1 2 1 25
and 2
60 5 60 60
c p = = + = . Thus
0
25
120
p = .
We want ( ) ( )
4 5 0 0
17 15 32
4 5 0.267
120 120 120
p p p c p c + = − + − = + = = .

127. Solution: D
Because the number of payouts (including payouts of zero when the loss is below the
deductible) is large, we can apply the central limit theorem and assume the total payout S
is normal. For one loss there is no payout with probability 0.25 and otherwise the payout
is U(0, 15000). So,
5625 7500 * 75 . 0 0 * 25 . 0 ] [ = + = X E ,
000 , 250 , 56 )
12
15000
7500 ( * 75 . 0 0 * 25 . 0 ] [
2
2 2
= + + = X E , so the variance of one claim is
375 , 609 , 24 ] [ ] [ ) (
2 2
= − = X E X E X Var .
Applying the CLT,
⎥
⎥
⎦
⎤
⎢
⎢
⎣
⎡
<
−
< − = < < 069044968 . 1
) 375 , 609 , 24 )( 200 (
) 5625 )( 200 (
781741613 . 1 ] 000 , 200 , 1 000 , 000 , 1 [
S
P S P
which interpolates to 0.8575(10.9626)=0.8201 from the provided table.
56 of 65
128. Key: B
Let H be the percentage of clients with homeowners insurance and R be the percentage of
clients with renters insurance.
Because 36% of clients do not have auto insurance and none have both homeowners and
renters insurance, we calculate that 8% (36% – 17% – 11%) must have renters insurance,
but not auto insurance.
(H – 11)% have both homeowners and auto insurance, (R – 8)% have both renters and
auto insurance, and none have both homeowners and renters insurance, so (H + R – 19)%
must equal 35%. Because H = 2R, R must be 18%, which implies that 10% have both
renters and auto insurance.
129. Key: B
The reimbursement is positive if health care costs are greater than 20, and because of the
memoryless property of the exponential distribution, the conditional distribution of health
care costs greater than 20 is the same as the unconditional distribution of health care
costs.
We observe that a reimbursement of 115 corresponds to health care costs of 150 (100% x
(120 – 20) + 50% x (150 – 120)), which is 130 greater than the deductible of 20.
Therefore,
130
100
(115) (130) 1 0.727 G F e
−
= = − = .
130. Key: C
( ) [ ] ( ) [ ]
( )
[ ] ( ) 9 . 41
5 . 0 ln 2 1
1
100 5 . 0 ln 100 100 5 . 0 100 5 . 0 100
5 . 0 ln
=
−
= = = =
X
X X X
M e E E E
57 of 65
131. Solution: E
First, find the conditional probability function of
2
N given
1 1
n N = : ( )
( )
( )
1 1
2 1
1 2 1  2
,

n p
n n p
n n p = ,
where ( )
1 1
n p is the marginal probability function of
1
N . To find the latter, sum the joint
probability function over all possible values of
2
N obtaining
( ) ( ) ( )
1
1
1
1
1
2 1 1 1
1
2
2
1 1
1
2
4
1
4
3
1
4
1
4
3
,
−
∞
=
−
− −
−
∞
=
⎟
⎠
⎞
⎜
⎝
⎛
= −
⎟
⎠
⎞
⎜
⎝
⎛
= =
∑ ∑
n
n
n
n n
n
n
e e n n p n p ,
since ( ) 1 1
1
1
2
2
1 1
= −
∑
∞
=
−
− −
n
n
n n
e e as the sum of the probabilities of a geometric random variable. The
conditional probability function is
( )
( )
( )
( )
1
1 1
2 1
1 2 1  2
2
1 1
1
,

−
− −
− = =
n
n n
e e
n p
n n p
n n p ,
which is the probability function of a geometric random variable with parameter
1
n
e p
−
= . The
mean of this distribution is
1 1
/ 1 / 1
n n
e e p = =
−
, and becomes
2
e when 2
1
= n .
132. Solution: C
The number of defective modems is 20% x 30 + 8% x 50 = 10.
The probability that exactly two of a random sample of five are defective is 102 . 0
5
80
3
70
2
10
=
⎟
⎟
⎠
⎞
⎜
⎜
⎝
⎛
⎟
⎟
⎠
⎞
⎜
⎜
⎝
⎛
⎟
⎟
⎠
⎞
⎜
⎜
⎝
⎛
.
133. Solution: B
Pr(man dies before age 50) = Pr(T < 50  T > 40)
=
) 40 ( 1
) 40 ( ) 50 (
) 40 Pr(
) 50 40 Pr(
F
F F
T
T
−
−
=
>
< <
=
40 50
40 50
40
1 1.1 1 1.1
(1.1 1.1 )
1000 1000
1000
1 1.1
1000
1
e e
e
e
− −
−
−
−
= −
= 0.0696
Expected Benefit = 5000 Pr(man dies before age 50) = (5000) (0.0696) = 347.96
58 of 65
134. Solutions: C
Letting t denote the relative frequency with which twinsized mattresses are sold, we
have that the relative frequency with which kingsized mattresses are sold is 3t and the
relative frequency with which queensized mattresses are sold is (3t+t)/4, or t. Thus, t =
0.2 since t + 3t + t = 1. The probability we seek is 3t + t = 0.80.
59 of 65
135. Key: E
Var (N) = E [ Var ( N  λ )] + Var [ E ( N  λ )] = E (λ) + Var (λ) = 1.50 + 0.75 = 2.25
136. Key: D
X follows a geometric distribution with
6
1
= p . Y = 2 implies the first roll is not a 6 and the
second roll is a 6. This means a 5 is obtained for the first time on the first roll (probability = 20%)
or a 5 is obtained for the first time on the third or later roll (probability = 80%).
[ ] 8 2 6 2
1
3  = + = + = ≥
p
X X E , so [ ] ( ) ( ) 6 . 6 8 8 . 0 1 2 . 0 2 = + = = Y X E
137. Key: E
Because X and Y are independent and identically distributed, the moment generating function of X
+ Y equals K
2
(t), where K(t)
is the moment generating function common to X and Y. Thus, K(t) =
0.30e
t
+ 0.40 + 0.30e
t
. This is the moment generating function of a discrete random variable that
assumes the values 1, 0, and 1 with respective probabilities 0.30, 0.40, and 0.30. The value we
seek is thus 0.70.
60 of 65
138. Key: D
Suppose the component represented by the random variable X fails last. This is
represented by the triangle with vertices at (0, 0), (10, 0) and (5, 5). Because the density
is uniform over this region, the mean value of X and thus the expected operational time of
the machine is 5. By symmetry, if the component represented by the random variable Y
fails last, the expected operational time of the machine is also 5. Thus, the unconditional
expected operational time of the machine must be 5 as well.
139. Key: B
The unconditional probabilities for the number of people in the car who are hospitalized
are 0.49, 0.42 and 0.09 for 0, 1 and 2, respectively. If the number of people hospitalized
is 0 or 1, then the total loss will be less than 1. However, if two people are hospitalized,
the probability that the total loss will be less than 1 is 0.5. Thus, the expected number of
people in the car who are hospitalized, given that the total loss due to hospitalizations
from the accident is less than 1 is
534 . 0 2
5 . 0 09 . 0 42 . 0 49 . 0
5 . 0 09 . 0
1
5 . 0 09 . 0 42 . 0 49 . 0
42 . 0
0
5 . 0 09 . 0 42 . 0 49 . 0
49 . 0
= ⋅
⋅ + +
⋅
+ ⋅
⋅ + +
+ ⋅
⋅ + +
140. Key: B
Let X equal the number of hurricanes it takes for two losses to occur. Then X is negative
binomial with “success” probability p = 0.4 and r = 2 “successes” needed.
2 2 2 2
1 1
[ ] (1 ) (0.4) (1 0.4) ( 1)(0.4) (0.6)
1 2 1
r n r n n
n n
P X n p p n
r
− − −
− − ⎛ ⎞ ⎛ ⎞
= = − = − = −
⎜ ⎟ ⎜ ⎟
− −
⎝ ⎠ ⎝ ⎠
, for n ≥ 2.
We need to maximize P[X = n]. Note that the ratio
2 1
2 2
[ 1] (0.4) (0.6)
(0.6)
[ ] ( 1)(0.4) (0.6) 1
n
n
P X n n n
P X n n n
−
−
= +
= =
= − −
.
This ratio of “consecutive” probabilities is greater than 1 when n = 2 and less than 1
when n ≥ 3. Thus, P[X = n] is maximized at n = 3; the mode is 3.
61 of 65
141. Key: C
There are 10 (5 choose 3) ways to select the three columns in which the three items will
appear. The row of the rightmost selected item can be chosen in any of six ways, the row
of the leftmost selected item can then be chosen in any of five ways, and the row of the
middle selected item can then be chosen in any of four ways. The answer is thus
(10)(6)(5)(4) = 1200. Alternatively, there are 30 ways to select the first item. Because
there are 10 squares in the row or column of the first selected item, there are 30 − 10 = 20
ways to select the second item. Because there are 18 squares in the rows or columns of
the first and second selected items, there are 30 − 18 = 12 ways to select the third item.
The number of permutations of three qualifying items is (30)(20)(12). The number of
combinations is thus (30)(20)(12)/3! = 1200.
142. Key: B
The expected bonus for a highrisk driver is 48 00 . 5 (months) 12 8 . 0 = ⋅ ⋅ .
The expected bonus for a lowrisk driver is 54 00 . 5 (months) 12 9 . 0 = ⋅ ⋅ .
The expected bonus payment from the insurer is 400 50 54 400 48 600 , = ⋅ + ⋅ .
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143. Key: E
P(Pr ∪ Li) = P(Pr) + P(Li ∩ Pr') = 0.10 + 0.01. Subtract from 1 to get the answer.
144. Key: E
The total time is less than 60 minutes, so if x minutes are spent in the waiting room, less
than 60 − x minutes are spent in the meeting itself.
145. Key: C
125 . 1
) , 75 . 0 (
) , 75 . 0 (
) , 75 . 0 (
) 75 . 0  (
1
0
y f
dy y f
y f
x y f = = =
∫
.
Thus,
⎩
⎨
⎧
< <
< <
= =
1 5 . 0 for 3 / 2
5 . 0 0 for 3 / 4
) 75 . 0  (
y
y
x y f ,
which leads to Var (Y  X = 0.75) = 11/144 = 0.076.
146. Key: B
C = the set of TV watchers who watched CBS over the last year
N = the set of TV watchers who watched NBC over the last year
A = the set of TV watchers who watched ABC over the last year
H = the set of TV watchers who watched HGTV over the last year
The number of TV watchers in the set A N C ∪ ∪ is 45 4 5 6 7 10 15 34 = + − − − + + .
Because A N C ∪ ∪ and H are mutually exclusive, the number of TV watchers in the set
H A N C ∪ ∪ ∪ is 63 18 45 = + .
The number of TV watchers in the complement of H A N C ∪ ∪ ∪ is thus 37 63 100 = − .
63 of 65
147. Key: A
Let X denote the amount of a claim before application of the deductible. Let Y
denote the amount of a claim payment after application of the deductible. Let
ì be the mean of X, which because X is exponential, implies that
2
ì is the
variance of X and ( )
2 2
2 E ì = X .
By the memoryless property of the exponential distribution, the conditional
distribution of the portion of a claim above the deductible given that the claim
exceeds the deductible is an exponential distribution with meanì . Given that
( ) ì 9 . 0 E = Y , this implies that the probability of a claim exceeding the
deductible is 0.9 and thus ( )
2 2 2
8 . 1 2 9 . 0 E ì ì = · = Y . Then,
( ) ( )
2 2 2
99 . 0 9 . 0 8 . 1 Var ì ì ì = ÷ = Y .
148. Key: C
Let N denote the number of hurricanes, which is Poisson distributed with mean
and variance 4.
Let
i
X denote the loss due to the i
th
hurricane, which is exponentially
distributed with mean 1,000 and therefore variance (1,000)
2
= 1,000,000.
Let X denote the total loss due to the N hurricanes.
This problem can be solved using the conditional variance formula. Note that
independence is used to write the variance of a sum as the sum of the variances.
( ) ( ) ( )
( ) ( )
( ) ( )
( ) ( )
( ) ( )
1 1
1 1
2
Var Var E  E Var 
Var E ... E Var ...
Var E E Var
Var 1, 000 E 1, 000, 000
1, 000 Var 1, 000, 000E
1, 000, 000(4) 1, 000, 000(4) 8, 000, 000
( ( = +
¸ ¸ ¸ ¸
( ( = + + + + +
¸ ¸ ¸ ¸
( ( = +
¸ ¸ ¸ ¸
= +
= +
= + =
N N
X X N X N
X X X X
N X N X
N N
N N
64 of 65
149. Key: B
Let N denote the number of accidents, which is binomial with parameters
1
4
and
3 and thus has mean
1 3
3
4 4
 
=

\ .
and variance
1 3 9
3
4 4 16
  
=
 
\ .\ .
.
Let
i
X denote the unreimbursed loss due to the i
th
accident, which is 0.3 times
an exponentially distributed random variable with mean 0.8 and therefore
variance (0.8)
2
= 0.64. Thus,
i
X has mean 0.8(0.3) = 0.24 and variance
2
0.64(0.3) 0.0576 = .
Let X denote the total unreimbursed loss due to the N accidents.
This problem can be solved using the conditional variance formula. Note that
independence is used to write the variance of a sum as the sum of the variances.
( ) ( ) ( )
( ) ( )
( ) ( )
( ) ( )
( ) ( ) ( )
1 1
1 1
2
Var Var E  E Var 
Var E ... E Var ...
Var E E Var
Var 0.24 E 0.0576
0.24 Var 0.0576E
9 3
0.0576 0.0576 0.0756.
16 4
( ( = +
¸ ¸ ¸ ¸
( ( = + + + + +
¸ ¸ ¸ ¸
( ( = +
¸ ¸ ¸ ¸
= +
= +
   
= + =
 
\ . \ .
N N
X X N X N
X X X X
N X N X
N N
N N
65 of 65
1. Solution: D Let
G = event that a viewer watched gymnastics
B = event that a viewer watched baseball S = event that a viewer watched soccer Then we want to find c Pr ⎡( G ∪ B ∪ S ) ⎤ = 1 − Pr ( G ∪ B ∪ S ) ⎣ ⎦
= 1 − ⎡ Pr ( G ) + Pr ( B ) + Pr ( S ) − Pr ( G ∩ B ) − Pr ( G ∩ S ) − Pr ( B ∩ S ) + Pr ( G ∩ B ∩ S ) ⎤ ⎣ ⎦ = 1 − ( 0.28 + 0.29 + 0.19 − 0.14 − 0.10 − 0.12 + 0.08 ) = 1 − 0.48 = 0.52
2. Solution: A Let R = event of referral to a specialist L = event of lab work We want to find P[R∩L] = P[R] + P[L] – P[R∪L] = P[R] + P[L] – 1 + P[~(R∪L)] = P[R] + P[L] – 1 + P[~R∩~L] = 0.30 + 0.40 – 1 + 0.35 = 0.05 .
3. Solution: D First note P [ A ∪ B ] = P [ A] + P [ B ] − P [ A ∩ B ]
P [ A ∪ B '] = P [ A] + P [ B '] − P [ A ∩ B '] Then add these two equations to get P [ A ∪ B ] + P [ A ∪ B '] = 2 P [ A] + ( P [ B ] + P [ B '] ) − ( P [ A ∩ B ] + P [ A ∩ B '] ) 1.6 = 2 P [ A] + 1 − P [ A]
P [ A] = 0.6
0.7 + 0.9 = 2 P [ A] + 1 − P ⎡( A ∩ B ) ∪ ( A ∩ B ') ⎤ ⎣ ⎦
2 of 65
4.
Solution: A For i = 1, 2, let Ri = event that a red ball is drawn form urn i
Bi = event that a blue ball is drawn from urn i .
Then if x is the number of blue balls in urn 2, = Pr [ R1 ] Pr [ R2 ] + Pr [ B1 ] Pr [ B2 ] 4 ⎛ 16 ⎞ 6 ⎛ x ⎞ ⎜ ⎟+ ⎜ ⎟ 10 ⎝ x + 16 ⎠ 10 ⎝ x + 16 ⎠
0.44 = Pr[( R1 ∩ R2 ) ∪ ( B1 ∩ B2 )] = Pr[ R1 ∩ R2 ] + Pr [ B1 ∩ B2 ]
= Therefore,
32 3x 3x + 32 + = x + 16 x + 16 x + 16 2.2 x + 35.2 = 3 x + 32 0.8 x = 3.2 x=4 2.2 = 5. Solution: D Let N(C) denote the number of policyholders in classification C . Then N(Young ∩ Female ∩ Single) = N(Young ∩ Female) – N(Young ∩ Female ∩ Married) = N(Young) – N(Young ∩ Male) – [N(Young ∩ Married) – N(Young ∩ Married ∩ Male)] = 3000 – 1320 – (1400 – 600) = 880 .
6. Solution: B Let H = event that a death is due to heart disease F = event that at least one parent suffered from heart disease Then based on the medical records, 210 − 102 108 P ⎡H ∩ F c ⎤ = = ⎣ ⎦ 937 937 937 − 312 625 P ⎡F c ⎤ = = ⎣ ⎦ 937 937 c P ⎡ H ∩ F ⎤ 108 625 108 ⎦= = = 0.173 and P ⎡ H  F c ⎤ = ⎣ ⎣ ⎦ c 937 937 625 P ⎡F ⎤ ⎣ ⎦
3 of 65
5 ) + ( 0. Pr ( A ∩ H ) = 0.4 )( 0.22 = 2 Pr [T ] − 0.53 ( = 53% ) 100292 01B9 8. Solution: D Let A = event that a policyholder has an auto policy H = event that a policyholder has a homeowners policy Then based on the information given.14 + Pr [T ] − 0.12 Therefore.4 Pr ( A ∩ H c ) + 0.8 Pr ( A ∩ H ) = ( 0. Solution: D Let C = event that patient visits a chiropractor T = event that patient visits a physical therapist We are given that Pr [C ] = Pr [T ] + 0.50 − 0.48 4 of 65 .35 and the portion of policyholders that will renew at least one policy is given by 0.15 = 0. 0.35 ) + ( 0.14 Pr ( C ∩ T ) = 0.15 = 0.65 − 0.6 )( 0.88 + 0.6 Pr ( Ac ∩ H ) + 0.50 Pr ( Ac ∩ H ) = Pr ( H ) − Pr ( A ∩ H ) = 0.8 )( 0.7.22 Pr ( C c ∩ T c ) = 0.08 ) 2 = 0.15 Pr ( A ∩ H c ) = Pr ( A ) − Pr ( A ∩ H ) = 0.88 = 1 − Pr ⎡C c ∩ T c ⎤ = Pr [C ∪ T ] = Pr [C ] + Pr [T ] − Pr [C ∩ T ] ⎣ ⎦ = Pr [T ] + 0.08 or Pr [T ] = ( 0.15 ) = 0.
nonsports).075 and P[C] = 2P[D] = 2 0.15 . But P ( Ac ∩ Bc) = 1 – P (A ∪ B) And.256 11.075 Now the independence of C and D also implies the independence of CC and DC .15 = P[C ∩ D] = P[C] P[D] = 2P[D] P[D] = 2(P[D])2 (P[D])2 = 0.205 10.20 – 0. As a result.075 ) (1 – 0.33 .64 = 0.20 + ( 0. By the Multiplicative Law. By the independence of C and D. Solution: B Let M = event that customer insures more than one car S = event that customer insures a sports car Then applying DeMorgan’s Law.15/2 = 0.075 ) = 0.15 * 0. 5 of 65 . we see that P[CC ∩ DC] = P[CC] P[DC] = (1 – P[C]) (1 – P[D]) = (1 – 2 0. we may compute the desired probability as follows: c Pr ( M c ∩ S c ) = Pr ⎡( M ∪ S ) ⎤ = 1 − Pr ( M ∪ S ) = 1 − ⎡ Pr ( M ) + Pr ( S ) − Pr ( M ∩ S ) ⎤ ⎣ ⎦ ⎣ ⎦ = 1 − Pr ( M ) − Pr ( S ) + Pr ( S M ) Pr ( M ) = 1 − 0. Solution: C Consider the following events about a randomly selected auto insurance customer: A = customer insures more than one car B = customer insures a sports car We want to find the probability of the complement of A intersecting the complement of B (exactly one car.744 = 0. by the Additive Law.70 − 0.096 It follows that P ( A ∪ B ) = 0. P ( A ∪ B ) = P ( A) + P ( B ) – P ( A ∩ B ).70 ) = 0. P ( A ∩ B ) = P ( B  A ) P (A) = 0.15 )( 0.075 P[D] = 0.9.096 = 0. it therefore follows that 0. Solution: B Let C = Event that a policyholder buys collision coverage D = Event that a policyholder buys disability coverage Then we are given that P[C] = 2P[D] and P[C ∩ D] = 0.64 + 0.744 and P (Ac ∩ Bc ) = 0.
06 Now we want to find c P ⎡( A ∪ B ∪ C ) ⎤ c ⎦ P ⎡( A ∪ B ∪ C )  Ac ⎤ = ⎣ c ⎣ ⎦ P ⎡A ⎤ ⎣ ⎦ 1− P[ A ∪ B ∪ C] = 1 − P [ A] = = 1 − 3 ( 0.20 0.64 1.12 ) − 0.00 From the table.28 = 0. In addition.467 0.15 Total 0.08 0.10 ) − 3 ( 0.06 0. we can see that 20% of patients have a regular heartbeat and low blood pressure.85 Irregular heartbeat 0.12 ) = x + 0.12 ) − 0.14 0.10 − 2 ( 0. Solution: E “Boxed” numbers in the table below were computed.12.04 3 3 2 x = 0. High BP Low BP Norm BP Total Regular heartbeat 0.05 0. we are told that P[ A ∩ B ∩ C] 1 x = P [ A ∩ B ∩ C  A ∩ B] = = P [ A ∩ B] x + 0.09 0. Solution: C The Venn diagram below summarizes the unconditional probabilities described in the problem.04 3 x = 0.22 0.12 3 It follows that 1 1 x = ( x + 0.56 0.06 1 − 0.60 6 of 65 . 13.02 0.
P[N > 1] = 1 – P[N ≤1] = 1 – (4/5 + 4/5 ⋅ 1/5) = 1 – 24/25 = 1/25 = 0.. z =1/4 ⎛ 1 1 1⎞ 1 again leading to w = 1 − ⎜ + + ⎟ = ⎝ 12 6 4 ⎠ 2 w = 1− ( x + y + z ) = 1− 7 of 65 .14. Therefore.. 1= ∞ k 15.04 . y = 1/6. y + z = 4 3 12 Adding these three equations gives 1 1 5 ( x + y) + ( x + z) + ( y + z) = + + 4 3 12 2( x + y + z) = 1 x+ y+ z = 1 2 1 1 = 2 2 Alternatively the three equations can be solved to give x = 1/12. = ⎜ ⎟ p0 pk = pk −1 = 5 55 5 5 5 ⎝5⎠ k k≥0 ∞ p 5 ⎛1⎞ pk = ∑ ⎜ ⎟ p0 = 0 = p0 ∑ k =0 ⎝ 5 ⎠ 1 4 k =0 1− 5 p0 = 4/5 . Solution: C A Venn diagram for this situation looks like: We want to find w = 1 − ( x + y + z ) 1 1 5 We have x + y = . x + z = . Solution: A 1 11 1 1 1 ⎛1⎞ pk − 2 = ⋅ ⋅ pk −3 = .
4] – 1 = 2(0.75 ) = 0.005h] = P[Y ≤ 0.005h] = P[Y ≤ 0.00562 h 2 + 0. Solution: D Let X1 and X2 denote the measurement errors of the less and more accurate instruments. X2 are X1 + X 2 0.25 = 1 − Pr ( E ) . It follows that Y = 8 of 65 .005h] – 1 = 2P ⎢ Z ≤ − 1 = 2P[Z ≤ 1.005h ⎤ ⎡ = 2P[Y ≤ 0. 0.75 .75 − Pr ( O )( 0. it follows Pr ( E ) = 0. X2 is N(0.005h] 0. Pr [ N1 + N 2 = 7 ] = ∑ n =0 Pr [ N1 = n ] Pr [ N 2 = 7 − n ] 7 7 ⎛ 1 ⎞⎛ 1 ⎞ = ∑ n =0 ⎜ n +1 ⎟⎜ 8− n ⎟ ⎝ 2 ⎠⎝ 2 ⎠ 7 1 = ∑ n =0 9 2 8 1 1 = 9 = 6 = 2 2 64 17. then we are given X1 is N(0. Solution: D Let N1 and N 2 denote the number of claims during weeks one and two. Therefore. respectively.00442 h 2 is N (0.0044h) and X1.9192) – 1 = 0.005h ≤ Y ≤ 0.0056h). P[−0. If N(μ. respectively.σ) denotes a normal random variable with mean μ and standard deviation σ. 0. 0.85 = Pr ( O ) + 0.10 Pr ( O ) = 0.005h] – P[Y ≥ 0. Then since N1 and N 2 are independent.00356h ⎥ ⎣ ⎦ independent. ) = N(0. Solution: D Let O = Event of operating room charges E = Event of emergency room charges Then 0. 0.40 = Pr ( O ) + Pr ( E ) − Pr ( O ) Pr ( E ) 18.00356h) .84. 2 4 0.85 = Pr ( O ∪ E ) = Pr ( O ) + Pr ( E ) − Pr ( O ∩ E ) Since So ( Independence ) Pr ( E c ) = 0.005h] – P[Y ≤ −0.75 ) Pr ( O )(1 − 0.16.
6 ) Pr ⎡Surv.001)( 0.02 )( 0. Surv.] ⎣ ⎦ 9 of 65 .⎤ Pr [Stab.04 )( 0.] + Pr ⎡Surv.10 ) ( 0. Stab.] + Pr ⎡Surv.06 )( 0.⎤ ⎣ ⎦ = = ( 0.28)  20.9 )( 0. Solution: D Let S = Event of a standard policy F = Event of a preferred policy U = Event of an ultrapreferred policy D = Event that a policyholder dies Then P [ D  U ] P [U ] P [U  D ] = P [ D  S ] P [ S ] + P [ D  F ] P [ F ] + P [ D  U ] P [U ] = ( 0.29 ( 0.9 )( 0.] ⎣ ⎦ ⎣ ⎦ ⎣ ⎦ Pr ⎡Surv.0141 21.⎤ Pr [Seri.99 )( 0.08) + ( 0.49 ) + ( 0.6 )( 0.15) + ( 0.1) + ( 0.10 ) = 0.⎤ Pr [Seri. Crit. Solution: B Apply Bayes’ Formula.01)( 0.001)( 0.005 )( 0.1584 ( 0. Seri. Solution: B Apply Baye’s Formula: Pr ⎡Seri.08) = 0.50 ) + ( 0.3) = 0. Seri.06 )( 0.⎤ Pr [ Crit.03)( 0. Let A = Event of an accident B1 = Event the driver’s age is in the range 1620 B2 = Event the driver’s age is in the range 2130 B3 = Event the driver’s age is in the range 3065 B4 = Event the driver’s age is in the range 6699 Then Pr ( A B1 ) Pr ( B1 ) Pr ( B1 A ) = Pr ( A B1 ) Pr ( B1 ) + Pr ( A B2 ) Pr ( B2 ) + Pr ( A B3 ) Pr ( B3 ) + Pr ( A B4 ) Pr ( B4 ) = ( 0.40 ) + ( 0.3) + ( 0.19.
upon applying Bayes’ Formula.22. Solution: D Let C = Event of a collision T = Event of a teen driver Y = Event of a young adult driver M = Event of a midlife driver S = Event of a senior driver Then using Bayes’ Theorem.4 ⎣ ⎦ = = = 0.15)(0.04)(0. Solution: B Observe Pr [1 ≤ N ≤ 4] ⎡ 1 1 1 1 ⎤ ⎡1 1 1 1 1⎤ =⎢ + + + ⎥ ⎢ + + + + ⎥ Pr ⎡ N ≥ 1 N ≤ 4 ⎤ = ⎣ ⎦ Pr [ N ≤ 4] ⎣ 6 12 20 30 ⎦ ⎣ 2 6 12 20 30 ⎦ = 10 + 5 + 3 + 2 20 2 = = 30 + 10 + 5 + 3 + 2 50 5 10 of 65 .08) + (0. (0.08)(0. we see that P[C Y ]P[Y ] P[Y⏐C] = P[C T ]P[T ] + P[C Y ]P[Y ] + P[C M ]P[ M ] + P[C S ]P[ S ] = (0.05)(0.25 + 0. we find that Pr ⎡ D H ⎤ Pr [ H ] ⎣ ⎦ Pr ⎡ H D ⎤ = ⎣ ⎦ Pr ⎡ D N ⎤ Pr N + Pr ⎡ D L ⎤ Pr L + Pr ⎡ D H ⎤ Pr H ⎣ ⎦ [ ] ⎣ ⎦ [ ] ⎣ ⎦ [ ] 2 Pr ⎡ D L ⎤ ( 0.16) = 0.42 1 0. Solution: D Let H = Event of a heavy smoker L = Event of a light smoker N = Event of a nonsmoker D = Event of a death within fiveyear period 1 Now we are given that Pr ⎣ D L ⎦ = 2 Pr ⎡ D N ⎤ and Pr ⎡ D L ⎤ = Pr ⎡ D H ⎤ ⎡ ⎤ ⎣ ⎦ ⎣ ⎦ 2 ⎣ ⎦ Therefore.2 ) ⎦ ⎣ ⎦ ⎣ ⎦ 2 ⎣ 23.08)(0.45) + (0.5 ) + Pr ⎡ D L ⎤ ( 0.31) 24.3 + 0.16) + (0.4 Pr ⎡ D L ⎤ ( 0.2 ) 0.3) + 2 Pr ⎡ D L ⎤ ( 0.22 .
2(0.01) = = 0.20)  11 of 65 .45 .16) + (0.95)(0.99) 26.25) 2 2 = = .05)(0.16) = 0.25) + 0.18) + (0. P[ A 1997]P[1997] P[1997A] = P[ A 1997][ P[1997] + P[ A 1998]P[1998] + P[ A 1999]P[1999] = (0.25 and P[S⏐C] = 2 P[S⏐CC] Now applying Bayes’ Theorem.02)(0. Solution: D Use Baye’s Theorem with A = the event of an accident in one of the years 1997.657 .95)(0. Solution: C Let: S = Event of a smoker C = Event of a circulation problem Then we are given that P[C] = 0.03)(0. P[DY] = P[Y  D]P[ D] + P[Y ~ D]P[~ D] (0. 1998 or 1999. we find that P[C⏐S] = = 2 P[ S C C ]P[C ] 2 P[ S C ]P[C ] + P[ S C ](1 − P[C ]) C C P[ S C ]P[C ] P[ S C ]P[C ] + P[ S C C ]( P[C C ]) = 2(0.01) + (0.75 2 + 3 5 27.25. (0.005)(0. Solution: B Let Y = positive test result D = disease is present (and ~D = not D) Using Baye’s theorem: P[Y  D]P[ D] (0.05)(0.
141)(1/ 5) = 0.7) ∫ λe 0 − λt dt = −e− λt 80 0 = 1 – e–80λ = 1 – (0.02 )( 0.7) It follows that P[T ≤ 80] = =1–e (80/50) ln(0.096 ( 0. P [ C  I1 ] = ( 0. P [ C  I1 ] = P [ I1  C ] P [ C ] + P ⎡ I1  C c ⎤ P ⎡C c ⎤ ⎣ ⎦ ⎣ ⎦ Now 1 P [C ] = 5 1 4 P ⎡C c ⎤ = 1 − P [ C ] = 1 − = ⎣ ⎦ 5 5 30 P [ I1  C ] = ( 1 ) ( 0. Now we are given that 0.334 )( 4 / 5) 29.10 )( 0. Then T is exponentially distributed with unknown parameter λ . We are given P[N = 2] = =3 = 3 ⋅ P[N 2! 4! = 4]24 λ2 = 6 λ4 λ2 = 4 ⇒ λ = 2 Therefore.141)(1/ 5) + ( 0.98 ) = 0.435 .7)80/50 = 0. Solution: C Let T denote the number of days that elapse before a highrisk driver is involved in an accident.7 or λ = − (1/50) ln(0. Solution: D 12 of 65 . e− λ λ 2 e− λ λ 4 Let N be the number of claims filed.90 ) = 0.141 29 29 30 P ⎡ I1  C c ⎤ = ( 1 ) ( 0. 30.3 = P[T ≤ 50] = 50 ∫ λe 0 − λt dt = −e− λt 80 50 0 = 1 – e–50λ Therefore.334 ⎣ ⎦ Therefore. Solution: A Let C = Event that shipment came from Company X I1 = Event that one of the vaccine vials tested is ineffective P [ I1  C ] P [ C ] Then by Bayes’ Formula. Var[N] = λ = 2 . e–50λ = 0.28.
98 ) = 0. 4 ) + f (1.940 0.668 0.20 ) + 4 ( 0.99 ≤ Pr [ X ≤ x ] = ∑ k =0 ( 20 ) ( 0. Y.20 ) + 4 ( 0. 0.98 ) k The following table summarizes the selection process for x: x Pr [ X = x ] Pr [ X ≤ x ] 0 1 2 ( 0. Solution: D Let X denote the number of employees that achieve the high performance level.98) = 0.02 ) ( 0. equivalently. z) = probability function of X.30 ) ( 0.20 ) + 4 3 3 = 0. 2.3) + f ( 0.0488 4! 2 2 ( 0.30 )( 0.98 ) = 0. and Z Then f is a trinomial probability function.02 . Solution: D Let X = number of lowrisk drivers insured Y = number of moderaterisk drivers insured Z = number of highrisk drivers insured f(x. y. Then X follows a binomial distribution with parameters n = 20 and p = 0.1.993 Consequently. 0.3) + f ( 0.668 19 20 ( 0. 000 or C = 60. 000 32. We conclude that we should choose the payment amount C such that 2C = 120. Now we want to determine x such that Pr [ X > x ] ≤ 0.272 2 18 190 ( 0.01 or.31. there is less than a 1% chance that more than two employees will achieve the high performance level. x k 20 − k 0.02 ) ( 0.20 ) 2!2! 13 of 65 .02 )( 0. so Pr [ z ≥ x + 2] = f ( 0.50 )( 0. 2 ) = ( 0.053 20 0.
12. 1 ⎞ ⎛ 0. calculate the probability over the interval (0.5∫ (10 + x ) dx = − (10 + x ) 0 0 ⎝ 10 16 ⎠ = 35.005 ⎜ 400 − 200 − 20 x + x 2 ⎟ = 0. Then. First.5). Solution: C Let the random variable T be the future lifetime of a 30yearold.5 ) = 0. 6): 6 −2 −1 6 ⎛1 1⎞ = ⎜ − ⎟ (12. calculate P(T < 5) by integrating f (x) = 12.33.005 ( 20 − t ) dt = 0.5 (10 + x)−2 2 over the interval (0. 14 of 65 .005 ⎜ 20t − t 2 ⎟ 20 x x 2 ⎠ ⎝ 1 ⎞ 1 ⎞ ⎛ ⎛ = 0. First. Therefore.47 . determine the proportionality constant C from the condition 1 = ∫ C (10 + x ) dx = − C (10 + x) −1 −2 0 40 40 ∫ 40 0 f ( x)dx =1 : 2 C C − = C 0 10 50 25 so C = 25 2 .5 . We know that the density of T has the form f (x) = C(10 + x)−2 for 0 < x < 40 (and it is equal to zero otherwise). Then. 2 Pr [ X > 16] 200 − 20 (16 ) + 1 2 (16 ) 8 1 Pr ⎡ X > 16 X > 8⎤ = = = ⎣ ⎦ Pr X > 8 = 1 ( 8)2 72 9 [ ] 200 − 20 (8) + 2 Pr [ X > x ] = ∫ 20 Solution: B Note that 34.005 ⎜ 200 − 20 x + x 2 ⎟ 2 ⎠ 2 ⎠ ⎝ ⎝ where 0 < x < 20 . determine the proportionality constant C from the condition 40 ∫ 0 f ( x)dx =1: 40 2 40 1 = ∫ f ( x)dx = − C (10 + x) −1 0 = C 0 25 25 so that C = = 12. Solution: C −2 We know the density has the form C (10 + x ) for 0 < x < 40 (equals zero otherwise).5. or 12.
4 = (0. . . 000] 0.368 ⎩ Now E[Yi] = 200(0.000] = P[100.1 ∫ 5 (1 − y ) dy = − (1 − y ) 4 1 5 1 0. note that 1 k k 4 5 1 = ∫ k (1 − y ) dy = − (1 − y ) 1 = 0 5 5 0 k=5 We next need to find P[V > 10. .000 Y > 10.239) = 102.000] = P[Y > 0. Y100 where with probability 0.590 37. 000] P[V > 10.239 i = 1. .59 and P[V > 40.56 Therefore.4 ∫ 5 (1 − y ) dy = − (1 − y ) 4 1 5 1 0.000 Y > 40.000] P[V > 40. 000] P[V > 40.36. 000 ∩ V > 10.393 0 2 0 P[1 ≤ T ≤ 2] = ∫ 2e 1 2 1 −t / 2 dt = e − t / 2 2 1 = e –1/2 − e –1 = 0.000] = P[Y > 0.9)5 = 0.000] = P[100. .256 .000⏐V > 10. = P[V > 10. 100 ⎪0 with probability 0.6)5 = 0.132 .393 ⎧ 200 ⎪ Yi = ⎨100 with probability 0. denote refunds for the 100 printers sold by independent and identically distributed random variables Y1.4] = 0. i =1 i 100 15 of 65 . Then f(t) = ½ e–t/2.239 Next. . It now follows that P[V > 40.078 = = = 0. .1] = 0.078 . Solution: B To determine k.56) = 10. . Solution: D Let T denote printer lifetime. 000] 0. 0 ≤ t ≤ ∞ Note that 1 1 P[T ≤ 1] = ∫ e −t / 2 dt = e − t / 2 1 = 1 – e–1/2 = 0.1 = (0. Expected Refunds = ∑ E [Y ] = 100(102.393) + 100(0.
It follows that P[X < 2] = (0.189 = 0.3 0.05)0 + 20(0.5 + C ) = ∫ Therefore.95)20(0.05 .5 Finally.05) + 190(0.05)2 = 0.5 + C 0 = ( 0.5 ) ⎤ ⎣ ⎦ Pr [ X ≥ 1.5+ C 0 2 x dx = x 2 0. Solution: A Let F denote the distribution function of f. since 0 < C < 1 . we find C = ±0.377 + 0.358 + 0.95)18(0.5 ) (1. The conditions of the problem give x is a binomial distribution with n = 20 and p = 0.5] = Pr ⎡( X < 2 ) ∩ ( X ≥ 1.5] 3 −3 F ( 2 ) − F (1.95)19(0.64 = Pr (Y < 0.5 ) ⎛3⎞ = 1− ⎜ ⎟ ⎝4⎠ = 0.5 ) = Pr ( 0 < X < 0.5 + C ) 2 16 of 65 .38.5] −3 = Pr [ X < 2] − Pr [ X ≤ 1. 40.5 ) (1.578 39. Solution: E Let X be the number of hurricanes over the 20year period. we conclude that C = 0.5 ) − ( 2 ) = = −3 1 − F (1.8 − 0. we see F ( x ) = Pr [ X ≤ x ] = ∫ 3t −4 dt = −t −3 = 1 − x −3 x x 1 1 Pr [ X < 2 X ≥ 1. Then if 0 < X ≤ C ⎧0 Y =⎨ ⎩ X − C if C < X < 1 Now we are given that 0. solving for C.925 .5] Pr [ X ≥ 1. Solution: B Denote the insurance payment by the random variable Y. Then Using this result.
Therefore. Solution: D Let IA = Event that Company A makes a claim IB = Event that Company B makes a claim XA = Expense paid to Company A if claims are made XB = Expense paid to Company B if claims are made Then we want to find C Pr ⎡ I A ∩ I B ⎤ ∪ ⎡( I A ∩ I B ) ∩ ( X A < X B ) ⎤ ⎦ ⎣ ⎦ ⎣ { } C = Pr ⎡ I A ∩ I B ⎤ + Pr ⎡( I A ∩ I B ) ∩ ( X A < X B ) ⎤ ⎣ ⎦ ⎣ ⎦ C = Pr ⎡ I A ⎤ Pr [ I B ] + Pr [ I A ] Pr [ I B ] Pr [ X A < X B ] ⎣ ⎦ (independence) = ( 0. Now we are given that X and Y are independent.2 )( 0. 000 − 10.8 ) ⎤ ⎡1 − ( 10 ) ( 0. Y = number of group 2 participants that complete the study.2 )( 0. Therefore.8 ) − ( 10 ) ( 0.30 ) + ( 0.41. 000 and standard deviation σ = Var ( X B ) + Var ( X A ) = It follows that ( 2000 ) + ( 2000 ) 2 2 = 2000 2 17 of 65 .60 )( 0.376] = 0. Solution: E Let X = number of group 1 participants that complete the study.30 ) Pr [ X B − X A ≥ 0] = 0.8 ) ⎤ 10 9 10 ⎣ 9 ⎦⎣ ⎦ = 2 [ 0.12 Pr [ X B − X A ≥ 0] Now X B − X A is a linear combination of independent normal random variables.469 (due to symmetry) (again due to symmetry) 42.18 + 0.376][1 − 0. 000 = −1. X B − X A is also a normal random variable with mean M = E [ X B − X A ] = E [ X B ] − E [ X A ] = 9.8 ) + ( 10 ) ( 0. P ⎡( X ≥ 9 ) ∩ ( Y < 9 ) ⎤ ∪ ⎡( X < 9 ) ∩ ( Y ≥ 9 ) ⎤ ⎣ ⎦ ⎣ ⎦ { } = P ⎡( X ≥ 9 ) ∩ ( Y < 9 ) ⎤ + P ⎡ ( X < 9 ) ∩ ( Y ≥ 9 ) ⎤ ⎣ ⎦ ⎣ ⎦ = 2 P ⎡( X ≥ 9 ) ∩ ( Y < 9 ) ⎤ ⎣ ⎦ = 2 P [ X ≥ 9 ] P [Y < 9 ] = 2 P [ X ≥ 9] P [ X < 9] = 2 P [ X ≥ 9] (1 − P [ X ≥ 9] ) 9 10 9 10 = 2 ⎡( 10 ) ( 0.40 )( 0.
= 1 − 0.223 { } 43.12 )( 0.354] (Z is standard normal) Finally.18 + ( 0.638 = 0. then k follows a negative binomial distribution and the requested probability is 4 k 3 3+ k ⎛ 3 ⎞ ⎛ 2 ⎞ Pr [ k ≥ 4] = 1 − Pr [ k ≤ 3] = 1 − ∑ ( k ) ⎜ ⎟ ⎜ ⎟ ⎝5⎠ ⎝ 5⎠ k =0 ⎛ 3⎞ = 1− ⎜ ⎟ ⎝ 5⎠ 4 ⎡ 3 ⎛ 2 ⎞0 4 ⎛ 2 ⎞1 5 ⎛ 2 ⎞ 2 6 ⎛ 2 ⎞3 ⎤ ⎢( 0 ) ⎜ ⎟ + ( 1 ) ⎜ ⎟ + ( 2 ) ⎜ ⎟ + ( 3 ) ⎜ ⎟ ⎥ ⎝5⎠ ⎝5⎠ ⎝ 5⎠ ⎥ ⎢ ⎝5⎠ ⎣ ⎦ ⎛ 3 ⎞ ⎡ 8 8 32 ⎤ = 1 − ⎜ ⎟ ⎢1 + + + ⎥ ⎝ 5 ⎠ ⎣ 5 5 25 ⎦ = 0.362 ) ⎦ ⎣ ⎦ ⎣ = 0.362 C Pr ⎡ I A ∩ I B ⎤ ∪ ⎡( I A ∩ I B ) ∩ ( X A < X B ) ⎤ = 0. and iii) calculating Pr [ k ≤ 3] 4 4 4 2 4 3 4 18 of 65 .1000 ⎤ ⎡ Pr [ X B − X A ≥ 0] = Pr ⎢ Z ≥ 2000 2 ⎥ ⎣ ⎦ 1 ⎤ ⎡ = Pr ⎢ Z ≥ 2 2⎥ ⎣ ⎦ 1 ⎤ ⎡ = 1 − Pr ⎢ Z < 2 2⎥ ⎣ ⎦ = 1 − Pr [ Z < 0. Solution: D If a month with one or more accidents is regarded as success and k = the number of failures before the fourth success.2898 Alternatively the solution is ⎛ 2⎞ 4 ⎛ 2⎞ 3 5 ⎛ 2⎞ ⎛ 3⎞ 6 ⎛ 2⎞ ⎛ 3⎞ ⎜ ⎟ + ( 1 ) ⎜ ⎟ + ( 2 ) ⎜ ⎟ ⎜ ⎟ + ( 3 ) ⎜ ⎟ ⎜ ⎟ = 0.2898 ⎝5⎠ ⎝ 5⎠ 5 ⎝ 5⎠ ⎝ 5⎠ ⎝ 5⎠ ⎝ 5⎠ which can be derived directly or by regarding the problem as a negative binomial distribution with i) success taken as a month with no accidents ii) k = the number of failures before the fourth success.
E [ X ] = E ⎡ max ( T .44. 5. then the insurance payment g(k) is 100k for k =1. 3 g(k) = 300 + 50 (k − 3) for k = 4. 2. { 5 Thus. 0 < t < ∞ 3 Therefore. Solution: D The density function of T is 1 f ( t ) = e−t / 3 . Solution: C If k is the number of days of hospitalization. Solution: D 0 0 4 2 4 x x2 x3 x3 8 64 56 28 + =− + = = dx = − Note that E ( X ) = ∫ − dx + ∫ 0 10 − 2 10 30 −2 30 0 30 30 30 15 46. the expected payment is ∑ g (k ) p k =1 k = 100 p1 + 200 p2 + 300 p3 + 350 p4 + 400 p5 = 1 (100 × 5 + 200 × 4 + 300 × 3 + 350 × 2 + 400 × 1) =220 15 45. 2 ) ⎤ ⎣ ⎦ =∫ 2 0 ∞ t 2 −t / 3 e dt + ∫ e− t / 3 dt 2 3 3 ∞ 2 2 = −2e − t / 3  0 −te− t / 3  ∞ + ∫ e− t / 3 dt 2 = −2e −2 / 3 + 2 + 2e −2 / 3 − 3e− t / 3  ∞ 2 = 2 + 3e −2 / 3 19 of 65 .
Next define the payment for 0 ≤ T ≤ 1 ⎧x ⎪x ⎪ for 1 < T ≤ 3 P under the insurance contract by P = ⎨ 2 ⎪ for T > 3 ⎪0 ⎩ We want to find x such that 1 x –t/10 e dt + 1000 = E[P] = ∫ 10 0 –1/10 –3/10 x 1 –t/10 − t /10 ∫ 2 10 e dt = − xe 1 –1/10 3 1 0 x − e −t /10 2 3 1 = −x e + x – (x/2) e + (x/2) e We conclude that x = 5644 . and ⎧1000 ( 5 − x ) if x = 1.3 if X = 4.6 ) ( 0. Solution: E Let X and Y denote the year the device fails and the benefit amount. 48. 2.3. We are given that T is exponentially distributed with parameter λ = 10 since 10 = E[T] = λ .3.6 ) ( 0. respectively. x = 1.4 ) + 2000 ( 0.4 ) = 2694 49.6 )( 0. 4 ⎪ y=⎨ if x > 4 ⎪0 ⎩ It follows that 2 3 E [Y ] = 4000 ( 0.4 ) + 3000 ( 0.1772x .47.4 ) . Solution: D Let T be the time from purchase until failure of the equipment..4 ) + 1000 ( 0.6 ) ( 0. Solution: D Define f ( X ) to be hospitalization payments made by the insurance policy. 2.5 20 of 65 . Then the density function of X is given by x −1 f ( x ) = ( 0. 2. = x(1 – ½ e –1/10 – ½ e–3/10) = 0.. Then ⎧100 X ⎪ f (X ) = ⎨ ⎪ ⎩300 + 25 ( X − 3) and if X = 1.
6)1. ⎩10. n = 0.5(0.5 ⎤ ⎡ 2.6) 2.5 + 2(0.6) 2.5 2.000 e–3/2 + E[10.6) 2. and the company under the policy. ∑10.6) 2.5(2)1.E ⎡ f ( X ) ⎤ = ∑ f ( k ) Pr [ X = k ] ⎣ ⎦ k =1 5 ⎛5⎞ ⎛ 4⎞ ⎛ 3⎞ ⎛ 2⎞ ⎛1⎞ = 100 ⎜ ⎟ + 200 ⎜ ⎟ + 300 ⎜ ⎟ + 325 ⎜ ⎟ + 350 ⎜ ⎟ ⎝ 15 ⎠ ⎝ 15 ⎠ ⎝ 15 ⎠ ⎝ 15 ⎠ ⎝ 15 ⎠ 1 640 = [100 + 160 + 180 + 130 + 70] = = 213.6 2 ∞ 2 2. for 0. and let P be the amount paid to (3 / 2) n e −3/ 2 .5(0.000 (N – 1)] n! n=0 –3/2 = 10.5 x 3.5(0.5 = 0.231 .000] = 10.000 (3/2) – 10.5 (0. 1. Then Pr[N = n] = n! for N = 0 ⎧0 P=⎨ .000 = 7. (2) 2.5 2(0.6) 2.5 1. Solution: C Let N be the number of major snowstorms per year.000 e–3/2 + 10. Solution: C Let Y denote the manufacturer’s retained annual losses. .5 ⎦ ⎦ 0.6) 2.5 ⎤ 2. .5(0.5 x 2.6 ⎣ 2 ⎣ 0.5(0.5 1.5(0.5 =− + + 1.33 3 3 50.5(0.5 2 21 of 65 . 000(n − 1) 51. 000( N − 1) for N ≥ 1 Now observe that E[P] = = 10.6) 2.000 e + E[10.6 < x ≤ 2 ⎧x Then Y = ⎨ for x > 2 ⎩2 and E[Y] = =− ∞ 2 ⎡ 2.5 1.5 x 2. 2.5 2.6) 2.5 x⎢ dx + ∫ 2 ⎢ dx = ∫ dx − ⎥ ⎥ ∫ x3.5 x1.9343 . 000(n − 1) n =1 ∞ (3 / 2) n e −3/ 2 n! (3 / 2) n e −3/ 2 = 10.000N] – E[10. .6) 2.6 2 0.000 e–3/2 + ∞ ∑10.
52.9 .5 ( 0. for 1 < y ≤ 10 ⎧y Let W denote claim payments. Solution: A Let us first determine K. It follows that E[W] = ∫ y 3 dy + ∫ 10 3 dy = − y y y1 y 10 1 10 Solution: D 22 of 65 . P = E [ X ] = ∑ N =3 ( N − 2 ) ⎡ 3 ⎤ ⎡ 3 ⎤ 3 ⎛ 1 ⎞ = (1) ⎜ ⎥ + 3⎢ ⎥ = 0..0314 ⎟+ 2⎢ 137 N ⎝ 137 ⎠ ⎣137 ( 4 ) ⎦ ⎣137 ( 5 ) ⎦ 53. N = 1. if N ≤ 2 . Observe that ⎛ 1 1 1 1⎞ ⎛ 60 + 30 + 20 + 15 + 12 ⎞ ⎛ 137 ⎞ 1 = K ⎜1 + + + + ⎟ = K ⎜ ⎟= K⎜ ⎟ 60 ⎝ 2 3 4 5⎠ ⎝ ⎠ ⎝ 60 ⎠ 60 K= 137 It then follows that Pr [ N = n ] = Pr ⎡ N = n Insured Suffers a Loss ⎤ Pr [ Insured Suffers a Loss ] ⎣ ⎦ 60 3 .. Then W = ⎨ for y ≥ 10 ⎩10 10 ∞ 2 2 2 10 10 ∞ − 2 = 2 – 2/10 + 1/10 = 1. if N > 2 5 Then..05) = 137 N 137 N Now because of the deductible of 2.. the net annual premium P = E [ X ] where = ⎧0 X =⎨ ⎩N − 2 .
020012 ) ⎡ −30e + 2e − 2e  1 ⎤ ⎣ ⎦ = 0.020012 ) ⎡ ∫ xe − x / 2 dx − ∫ e − x / 2 dx ⎤ + 0.5 ) = 0.5 + 2e −0.54. note (1 + x) 4 = k 3 dx and substituting u = 1 + x. To find k. 55.020012 ) ⎡ −2 xe − x / 2  15 +2∫ e − x / 2 dx − ∫ e − x / 2 dx ⎤ 1 ⎢ ⎥ 1 1 ⎣ ⎦ 15 = 0.5 −0.5003) ∫ 15 1 ( x − 1) e− x / 2 dx + ( 0.28 + ( 0.28 + ( 0.5 + ∫ e− x / 2 dx ⎤ ⎢ ⎥ 1 ⎣ ⎦ −7.28 + ( 0.5 + 2e−0. du = dx.328 It follows that the expected claim payment is 328 . 0 < x < ∞ .020012 ) ( −30e −7.5 − 2e−7.04 )( 0.5 ) = 0.28 + ( 0.5 + 2e −0.94 ⎧0 ⎪ Y = ⎨Max ( 0. 4 u ⎣ 2 3⎦ ⎣ −2 −3 ⎦1 1 1 23 of 65 . Solution: C The pdf of x is given by f(x) = k k 1 ∫ (1 + x)4 dx = − 3 (1 + x)3 0 k=3 1= ∞ ∞ ∞ 0 k .28 ⎢1 ⎥ 1 ⎣ ⎦ 15 15 = 0. Solution: B Let Y denote the claim payment made by the insurance company. we see ∞ It then follows that E[x] = ∞ ∫ (1 + x) 0 3x 4 ∞ ⎡ u −2 u −3 ⎤ 3(u − 1) ⎡1 1⎤ − E[x] = ∫ du = 3 ∫ (u −3 − u −4 )du = 3 ⎢ ⎥ = 3 ⎢ − ⎥ = 3/2 – 1 = ½ .94 )( 0 ) + ( 0.28 + ( 0.28 + ( 0.020012 ) ⎡ −30e −7.02 ⎩ and E [Y ] = ( 0.5 + 4e −0.408 ) (in thousands) = 0.020012 ) ( −32e −7.020012 )( 2. Then with probability 0.04 ⎪14 with probability 0. x − 1) with probability 0.02 )(14 ) 15 15 = ( 0.5 − x / 2 15 = 0.
56.5 (1 – 2t)–4.000 E[X2] = Mx″ (0) = 125.000.000 – (10. XK. Then X = XJ + XK + XL and due to independence ⎡ x +x +x t ⎤ ⎡ ⎤ ⎣ ⎦ ⎣ ⎦ M(t) = E ⎡e xt ⎤ = E ⎣e( J K L ) ⎦ = E ⎣e xJ t ⎦ E ⎡ e xK t ⎤ E ⎡ e xLt ⎤ ⎣ ⎦ = MJ(t) MK(t) ML(t) = (1 – 2t)–3 (1 – 2t)–2.000 . M′(t) = 20(1 – 2t)–11 M″(t) = 440(1 – 2t)–12 M″′(t) = 10.000 Var[ X ] = 5. 000)(−5)(−2500) 125. Solution: B 1 for the claim size X in a certain class of accidents. We are given that Mx(t) = 58.000)2 = 25. for 0 ≤ X ≤ D ⎧0 That is Y = ⎨ ⎩ x − D for D < X ≤ 1 Then since E[X] = 500.000. 000 First. (1 − 2500t ) 4 (−4)(−2500) 10. Solution: E Let XJ. 000 Mx″(t) = = (1 − 2500t )6 (1 − 2500t )6 Then E[X] = Mx′ (0) = 10. compute Mx′(t) = = 5 (1 − 2500t ) (1 − 2500t )5 (10. we want to choose D so that 1000 1 1 1 ( x − D) 2 1000 (1000 − D) 2 500 = ∫ ( x − D)dx = = D 4 1000 1000 2 2000 D (1000 – D)2 = 2000/4 ⋅ 500 = 5002 1000 – D = ± 500 D = 500 (or D = 1500 which is extraneous).5 = (1 – 2t)–10 Therefore. and XL represent annual losses for cities J. Solution: C Let Y represent the payment made to the policyholder for a loss subject to a deductible D. respectively. and L.560 24 of 65 .000 Var[X] = E[X2] – {E[X]}2 = 125.560(1 – 2t)–13 E[X3] = M″′(0) = 10. K. 57. 000.000.
5 100 xp ( 200 ) 1 − 0. z ∞ Q1 f(x) dx . is found by ¾ = Q1 = 200 (4/3)0. is given by Q3 = 200 (4)0. ¾ = (200/Q1)2. Solution: A The first quartile. 61.2X] = (1.5 2.2 . Similarly.5 2.4 = 348.70 ) 200 25 = 93.30 ) 200 25 − ( 0.5 2.5 x ( 200 ) = 1− x 2.01 p ) 200 It follows that x 70 − x 30 = ( 0. Solution: B The distribution function of X is given by 2. x > 200 200 Therefore.5 ( 200 ) F ( x) = ∫ 200 t 3.4 .5 (1 − 0. Q3.5 − ( 200 ) dt = t 2.59.2)2 Var[X] = (1.01 p = xp = 2.4 = 224.5 2. respectively.5 x 2.5 or 25 of 65 . That is. Q1. the third quartile. Then Y = 1.5 . Solution: E Let X and Y denote the annual cost of maintaining and repairing a car before and after the 20% tax. The interquartile range is the difference Q3 – Q1 .06 60.2)2(260) = 374 .01 p ) xp = 25 200 xp 25 (1 − 0.2X and Var[Y] = Var[1. the p percentile x p of X is given by th ( 200 ) p = F ( xp ) = 1− 2.
Solution: C ⎧ X if 0 ≤ X ≤ 4 Note Y = ⎨ ⎩4 if 4 < X ≤ 5 Therefore.62.71 ⎣ ⎦ 15 ⎝ 5 ⎠ 2 26 of 65 . 41 54 1 4 4 E [Y ] = ∫ xdx + ∫ dx = x 2  0 + x 5 4 0 5 4 5 10 5 16 20 16 8 4 12 = + − = + = 10 5 5 5 5 5 41 5 16 1 16 4 E ⎡Y 2 ⎤ = ∫ x 2 dx + ∫ dx = x 3  0 + x 5 4 ⎣ ⎦ 05 4 5 15 5 64 80 64 64 16 64 48 112 = + − = + = + = 15 5 5 15 5 15 15 15 2 112 ⎛ 12 ⎞ Var [Y ] = E ⎡Y 2 ⎤ − ( E [Y ] ) = − ⎜ ⎟ = 1. Solution: C First note that the density function of X is given by ⎧1 if x =1 ⎪2 ⎪ ⎪ 1< x < 2 f ( x ) = ⎨ x − 1 if ⎪ ⎪ otherwise ⎪0 ⎩ Then 2 2 1 1 1 ⎛1 1 ⎞ E ( X ) = + ∫ x ( x − 1) dx = + ∫ x 2 − x dx = + ⎜ x3 − x 2 ⎟ 1 1 2 2 2 ⎝3 2 ⎠1 ( ) 2 = 1 8 4 1 1 7 4 + − − + = −1 = 2 3 2 3 2 3 3 E X ( ) 2 2 2 1 1 1 ⎛1 1 ⎞ = + ∫ x 2 ( x − 1) dx = + ∫ x3 − x 2 dx = + ⎜ x 4 − x3 ⎟ 2 1 2 1 2 ⎝4 3 ⎠1 ( ) 2 = 1 16 8 1 1 17 7 23 + − − + = − = 2 4 3 4 3 4 3 12 Var ( X ) = E X ( ) 2 23 ⎛ 4 ⎞ 23 16 5 − ⎡ E ( X )⎤ = ⎣ ⎦ 12 − ⎜ 3 ⎟ = 12 − 9 = 36 ⎝ ⎠ 2 2 63.
00 – 21.10) + 70(0.30)] = (3 + 3 + 2 + 10 + 6 + 7 + 24) = 55 E[X2] = 400(0.20 + 0. Then if we define Y = max (X1. 76.10) + 80(0. respectively. 028 − ( 521) ⎣ ⎦ 2 2 Var [Y ] = 403 66.05) + 50(0. 16 2 2 It then follows that the density function g of Y is given by 27 of 65 .79.15) + 30(0.10 + 0.10) + 6400(0. Then E[X] = [20(0.00 + 21. X4).30) = 60 + 90 + 80 + 500 + 360 + 490 + 1920 = 3500 Var[X] = E[X2] – (E[X])2 = 3500 – 3025 = 475 and Var[ X ] = 21. Then if x ≤ 250 ⎧0 Y =⎨ ⎩ x − 250 if x > 250 and 1500 1 1 12502 2 E [Y ] = ∫ x − 250 )dx = x − 250 ) 1500 = = 521 ( ( 250 250 1500 3000 3000 1500 1 1 12503 2 3 E ⎡Y 2 ⎤ = ∫ = 434.05 + 0.64.10) + 40(0. the distribution function G of Y is given by G ( y ) = Pr [Y ≤ y ] = Pr ⎡( X 1 ≤ y ) ∩ ( X 2 ≤ y ) ∩ ( X 3 ≤ y ) ∩ ( X 4 ≤ y ) ⎤ ⎣ ⎦ = Pr [ X 1 ≤ y ] Pr [ X 2 ≤ y ] Pr [ X 3 ≤ y ] Pr [ X 4 ≤ y ] = ⎡ F ( y )⎤ ⎣ ⎦ = 4 1 3 5 4 ≤ y≤ (1 + sinπ y ) .79 .79] = [33.21. X3. Solution: E Let X1.10) + 1600(0. 55.10) + 4900(0.20) + 3600(0. Solution: A Let X denote claim size. 65.79] Therefore.15) + 900(0. and X4 denote the four independent bids with common distribution function F.20) + 60(0. X2. Now the range of claims within one standard deviation of the mean is given by [55.05) + 2500(0. X2. Solution: B Let X and Y denote repair cost and insurance payment.10 = 0. X3.45 . 028 ( x − 250 ) dx = ( x − 250 ) 1500 = 250 ⎣ ⎦ 250 1500 4500 4500 Var [Y ] = E ⎡Y 2 ⎤ − { E [Y ]} = 434. the proportion of claims within one standard deviation is 0. in the event the auto is damaged.
6 ( 0.6 ) p ( x) = k = 0.6k 2 2 2 − ( 2000 ) e −0.6 − ⎡( 2000 ) − (1000 ) ⎤ ( 0.1. Solution: B The amount of money the insurance company will have to pay is defined by the random variable ⎧1000 x if x < 2 Y =⎨ if x ≥ 2 ⎩2000 where x is a Poisson random variable with mean 0.893 − ( 573) = 488. 3 5 ≤ y≤ 2 2 E [Y ] = ∫ =∫ 3/ 2 5/ 2 yg ( y ) dy π 4 3/ 2 ycosπ y (1 + sinπ y ) dy 3 67.6 ∑ k =0 ∞ ( 0.6 −0.6 ⎟ k! ⎝ ⎠ = 2000e = 573 E ⎡Y 2 ⎤ = (1000 ) ( 0.6 − ⎡( 2000 ) − (1000 ) ⎤ ( 0. Finally.6 .6 − 1000 ( 0.6 = 1000 ( 0.6 E [Y ] = 0 + 1000 ( 0.6 + 2000 ⎜ e −0.6 ) k! k − 2000e −0.6 + ( 2000 ) e −0.564 ⎣ ⎦ Var [Y ] = 699 28 of 65 .6 − ( 0.6 0.6 ) e + 2000e ∑ k = 2 k! k ⎛ ⎞ ∞ 0.6 ) e −0. The probability function for X is k e −0.6 ∑ k = 2 ⎣ ⎦ 2 2 −0.6 ) e −0.6 ∑ k =0 2 = ( 2000 ) 2 0.g ( y ) = G '( y ) = = 1 3 (1 + sinπ y ) (π cosπ y ) 4 4 cosπ y (1 + sinπ y ) 5/ 2 3 π .3 and k! k ∞ 0.6 −0.6 ) e −0.6 ) e−0.6 = 2000 − 2000e −0.6 )e −0.893 Var [Y ] = E ⎡Y 2 ⎤ − { E [Y ]} = 816.6 ⎣ ⎦ ∞ 2 2 = 816.6k k! ∞ = ( 2000 ) e −0. 2.6 − 600e−0.6 ∑ k =0 − e −0.6 ) e −0.6 ⎣ ⎦ k! 2 2 2 − ( 2000 ) e −0.
004 x 0 m m 0 = 1 – e–0.05 e –1/3 p95 = −300 ln(0.68. Pr (T ≥ 5 ) = 1 − F ( 5 ) = e −5 θ = e 5ln ( 2 ) 4 = 2−5 4 = 0.29 . We are given that X follows an exponential distribution with mean 300. we want to find p95 such that Pr[100 < x < p95 ] F ( p95 ) − F (100) 0. Consequently.5 ⇒ m = 250 ln 2 = 173.50 for x ≥ 250 ⎩250 = ∫ 0.004m This condition implies e–0. P[ X > 100] 1 − F (100) Now F(x) = 1 – e–x/300 . Now let Y denote the for x < 250 ⎧x claim benefits paid. Solution: E Let X denote actual losses incurred.004e −0. Solution: C Note that X has an exponential distribution.95 = 1 − (1 − e −100 / 300 ) e −1/ 3 e − p95 / 300 = 0. 69.95 = = where F(x) is the distribution function of X . c = 0.004m = 0. Solution: D The distribution function of an exponential random variable T with parameter θ is given by F ( t ) = 1 − e − t θ . 0.05 e–1/3) = 999 29 of 65 .42 70. Then Y = ⎨ and we want to find m such that 0. 1 − e − p95 / 300 − (1 − e −100 / 300 ) e −1/ 3 − e − p95 / 300 = = 1 − e1/ 3e − p95 / 300 Therefore. and we are asked to find the 95th percentile of all claims that exceed 100 . Therefore. we may determine θ as follows: 1 = F ( 4 ) = 1 − e−4 θ 2 1 = e −4 θ 2 4 − ln ( 2 ) = − θ θ= 4 ln ( 2 ) − Therefore.004 x dx = −e −0.004 . t > 0 Since we are told that T has a median of four hours.
Differentiate to obtain the density function g ( y ) = 4 y −2 Alternate solution: Differentiate F ( t ) to obtain f ( t ) = 8t −3 and set y = t 2 . 000 ) ⎤ ⎣ ⎦ ⎣ ⎦ 1 ln ( v )−ln (10.04 0. Solution: A The distribution function of Y is given by G ( y ) = Pr (T 2 ≤ y ) = Pr T ≤ y = F y = 1 − 4 y ( ) ( ) for y > 4 . 000e R ≤ v ⎤ = Pr ⎡ R ≤ ln ( v ) − ln (10.000 ) = 25ln ( v ) − 25ln (10. Solution: E ⎡ F ( y ) = Pr [Y ≤ y ] = Pr ⎡10 X 0. 000 ⎠ ⎦ ln ( v ) − ln (10.04.04 0. f ( y ) = F ′ ( y ) = ⎜ ⎟ e ( ) 8 ⎝ 10 ⎠ 1 ( ) 10 8 − (Y ) ⎤ = 1 − e 10 ⎥ ⎦ 10 8 30 of 65 . 000e R Therefore. 000 ) − 1 0.04 ⎡ ⎛ v ⎞ ⎤ = 25 ⎢ ln ⎜ ⎟ − 0.04 ⎥ ⎣ ⎝ 10.8 ≤ y ⎤ = Pr ⎢ X ≤ Y ⎣ ⎦ 10 ⎣ 1 ⎛ Y ⎞ 4 − Y 10 5 4 Therefore. Then t = g ( y ) = f ( t ( y ) ) dt dy = f d ( y ) dt ( y ) = 8 y −3 2 y and ⎛ 1 −1 2 ⎞ −2 ⎜ y ⎟ = 4y ⎝2 ⎠ 72.08 ) and V = 10. the distribution function of V is given by F ( v ) = Pr [V ≤ v ] = Pr ⎡10.71.000 ) 1 dr = r = ∫0. 0.04 73. Solution: E We are given that R is uniform on the interval ( 0.
y>1 31 of 65 . dt 4 −1 ⎛ −10 ⎞ 5 Therefore fR(r) = ⎜ 2 ⎟= 2 . Differentiating with respect to r⎦ ⎣T ⎦ ⎣ ⎝ r ⎠ ⎛ ⎛ 10 ⎞ ⎞ ⎛d ⎞ ⎛ −10 ⎞ r fR(r) = F′R(r) = d/dr ⎜1 − FT ⎜ ⎟ ⎟ = − ⎜ FT ( t ) ⎟ ⎜ 2 ⎟ ⎝ r ⎠⎠ ⎝ dt ⎠⎝ r ⎠ ⎝ d 1 FT (t ) = fT (t ) = since T is uniformly distributed on [8. and X3 denote the three claims made that have this distribution. it follows that the distribution function of Y is given by G ( y ) = Pr [ X 1 ≤ y ] Pr [ X 2 ≤ y ] Pr [ X 3 ≤ y ] ⎛ 1 ⎞ .74. X2. 2 2 3 . Then G(y) = Pr[Y ≤ y] = P[2X ≤ y] = P[X ≤ y/2] = F(y/2) and g(y) = G′(y) = d/dy F(y/2) = ½ F′(y/2) = ½ f(y/2) . 4 ⎝ r ⎠ 2r 75. 12] . observe that the distribution function of X is given by x 3 1 x 1 F ( x ) = ∫ 4 dt = − 3  1 = 1 − 3 . Then 10 ⎤ ⎡10 ⎤ ⎡ ⎛ 10 ⎞ FR(r) = P[R ≤ r] = P ⎢ ≤ r ⎥ = P ⎢T ≥ ⎥ = 1 − FT ⎜ ⎟ . let X1. Solution: E First note R = 10/T . 76. Then if Y denotes the largest of these three claims. x > 1 1 t t x Next. We are given that the pdf of X is f . Solution: A First. Solution: A Let X and Y be the monthly profits of Company I and Company II. y>1 = ⎜1 − 3 ⎟ y ⎠ ⎝ while the density function of Y is given by ⎛ 1 ⎞ ⎛ 3 ⎞ ⎛ 9 ⎞⎛ 1 ⎞ g ( y ) = G ' ( y ) = 3 ⎜1 − 3 ⎟ ⎜ 4 ⎟ = ⎜ 4 ⎟⎜ 1 − 3 ⎟ y ⎠ ⎝ y ⎠ ⎝ y ⎠ ⎝ y ⎠⎝ Therefore. Let us also take g to be the pdf of Y and take F and G to be the distribution functions corresponding to f and g . respectively.
This evaluation is more easily performed by integrating over the unshaded region and subtracting from 1.625 8 Pr ⎡( X ≤ 1) ∪ (Y ≤ 1) ⎤ = Pr ⎡( X > 1) ∩ (Y > 1) ⎤ ⎣ ⎦ ⎣ ⎦ = 1 − Pr ⎡( X > 1) ∩ (Y > 1) ⎤ ⎣ ⎦ 1 2⎡ 2 2 ∫ 1 ⎣( y + 2 ) − ( y + 1) ⎤ dy ⎦ 16 18 30 = 1− = = 0.025 (in thousands) ⎣2 5 8⎦ 77. 32 of 65 . Solution: D Prob.625 48 48 = 1− = 1− ∫ = 1− 2 1 { c } (De Morgan's Law) = 1− 2 1 1 ⎡ 3 3 ( y + 2 ) − ( y + 1) ⎤ ⎦ 48 ⎣ 1 ∫ 8 ( x + y ) dxdy 2 1 1 21 2 2 ∫ 1 2 ( x + y ) 1 dy 8 1 = 1 − ( 64 − 27 − 27 + 8 ) 48 78. Solution: B That the device fails within the first hour means the joint density function must be integrated over the shaded region shown below.E [Y ] = ∫ ∞ 1 ∞ ∞ 9 ⎛ 9 ⎛ 1 ⎞ 2 1 ⎞ 1 − 3 ⎟ dy = ∫ 3 ⎜ 1 − 3 + 6 ⎟ dy 3 ⎜ 1 y y ⎝ y ⎠ y ⎠ ⎝ y ∞ 2 ⎛ 9 18 9 ⎞ ⎡ 9 18 9 ⎤ = ∫ ⎜ 3 − 6 + 9 ⎟ dy = ⎢ − 2 + 5 − 8 ⎥ 1 y y ⎠ ⎝y ⎣ 2 y 5 y 8 y ⎦1 ⎡1 2 1⎤ = 9 ⎢ − + ⎥ = 2. = 1− Note 2 2 ∫∫ 1 1 1 ( x + y )dxdy = 0.
282 )(11. Solution: C By the central limit theorem. the 90th percentile for a standard normal 33 of 65 .282. the total contributions are approximately normally distributed with mean nμ = ( 2025 )( 3125 ) = 6. 250 ) = 6. 1/ 2 1 1 1/ 2 ⎡⎛ 1⎞ ⎛ 1 ⎞⎤ Pr ⎢⎜ S ≤ ⎟ ∪ ⎜ T ≤ ⎟ ⎥ = ∫ ∫ f ( s. Therefore.282 . Note that the shaded region is the portion of the domain of s and t over which the device fails sometime during the first half hour.282 σ n = 6.548 . 80.342.125 + (1. Letting p be the 90th percentile for total contributions. t ) dsdt 0 0 2⎠ ⎝ 2 ⎠ ⎦ 0 1/ 2 ⎣⎝ (where the first integral covers A and the second integral covers B).Pr ⎡( X < 1) ∪ (Y < 1) ⎤ ⎣ ⎦ = 1− ∫ = 1− 3 1 ∫ 3 1 2 3 x + 2 xy x+ y 1 3 dx dy = 1 − ∫ dy = 1 − ∫ ( 9 + 6 y − 1 − 2 y ) dy 1 27 54 1 54 1 3 3 1 3 1 1 32 11 2 ∫1 (8 + 4 y ) dy = 1 − 54 (8 y + 2 y ) 1 = 1 − 54 ( 24 + 18 − 8 − 2 ) = 1 − 54 = 27 = 0. Solution: E The domain of s and t is pictured below. and so p = nμ + 1. From the tables. 250 .328. p − nμ = 1. σ n σ n = 250 2025 = 11. t ) dsdt + ∫ ∫ f ( s.328.125 and standard deviation random variable is 1.41 54 79.
.000] 25 ⎡ X − 19. Therefore P[2450 < S < 2600] = S − 2500 ⎡ 2450 − 2500 S − 2500 2600 − 2500 ⎤ ⎡ ⎤ < < < 2⎥ P⎢ ⎥ = P ⎢ −1 < 50 2500 2500 2500 ⎦ ⎣ ⎦ ⎣ ⎡ S − 2500 ⎤ ⎡ S − 2500 ⎤ = P⎢ < 2⎥ − P ⎢ < −1⎥ ⎣ 50 ⎦ ⎣ 50 ⎦ S − 2500 .6 ⎥ = 1 − Φ(0.8413 – 1 = 0.400 and standard deviation 5000 . It follows that E[Xi] = Var[Xi] = 2 . We conclude that P[ X > 20. . Assuming that the random variables are independent. . . Xn denote the life spans of the n light bulbs purchased.9772 ≤ Pr [ S > 40] = Pr ⎢ > ⎥ n ⎦ ⎣ n This implies that n should satisfy the following inequality: 34 of 65 . . the random variable S = X1 + … + Xn is also normally distributed with mean μ = 3n and standard deviation σ= n Now we want to choose the smallest value for n such that ⎡ S − 3n 40 − 3n ⎤ 0. . .2743 . . 000 − 19. 25) follows a normal distribution with mean 19. 83.400 and standard deviation (5000) = 1000 . . Solution: C 1 Let X1. . . +X25) .8186 . We are given that each Xi follows a Poisson distribution with mean 2 .81. 82. Since these random variables are independent and normally distributed with mean 3 and variance 1. 400 ⎤ > > 0. X25 denote the 25 collision claims.…. 400 20.9773 + 0. . Solution: B Let X1. we have P[2450 < S < 2600] Then using the normal approximation with Z = 50 ≈ P[Z < 2] – P[Z > 1] = P[Z < 2] + P[Z < 1] – 1 ≈ 0. Now we are interested in the random variable S = X1 + . . + X1250 . . Solution: B Let X1.7257 = P⎢ ⎥ = P ⎢ 1000 1000 ⎣ 1000 ⎦ ⎣ ⎦ = 0. we may conclude that S has an approximate normal distribution with E[S] = Var[S] = (2)(1250) = 2500 . . 400 ⎤ ⎡ X − 19. As a result X also follows a normal distribution with mean 1 19. and let X = (X1 + . X1250 be the number of claims filed by each of the 1250 policyholders. .6) = 1 – 0. We are 25 given that each Xi (i = 1.
40 − 3n n To find such an n.8413 where Z is a standard normal random variable. Solution: B Observe that E [ X + Y ] = E [ X ] + E [Y ] = 50 + 20 = 70 Var [ X + Y ] = Var [ X ] + Var [Y ] + 2 Cov [ X . Y ] = 50 + 30 + 20 = 100 for a randomly selected person. It then follows from the Central Limit Theorem that T is approximately normal with mean E [T ] = 100 ( 70 ) = 7000 and variance Var [T ] = 100 (100 ) = 1002 ⎡ T − 7000 7100 − 7000 ⎤ Pr [T < 7100] = Pr ⎢ < ⎥ 100 ⎣ 100 ⎦ = Pr [ Z < 1] = 0. let’s solve the corresponding equation for n: 40 − 3n −2 = n −2 ≥ −2 n = 40 − 3n 3n − 2 n − 40 = 0 (3 n + 10 )( n −4 =0 n =4 n = 16 ) 84. Therefore. 35 of 65 .
the Central Limit Theorem then implies that S = X 1 + .85. X 100 are assumed by the consulting actuary to be independent.. It follows from the Central Limit Theorem that S is approximately normally distributed with mean 100..100 .7 ) = 70 and variance Var [ S ] = Var [ X 1 ] + . 000 − 100.99 36 of 65 .000. Var[X] = 1.000] = 1 – P ⎢ Z ≤ ⎥ = 1 – P[Z ≤ 1] = 1 10. + X 100 is approximately normally distributed with mean E [ S ] = E [ X 1 ] + .5] = Pr ⎢ ≤ ⎥ 9 ⎣ 9 ⎦ = Pr [ Z ≤ 2.1) + ( 2 )( 0..4 )( 0.. + Var [ X 100 ] = 100 ( 0.6 ) + (1)( 0.000 and standard deviation = 10. and ⎣ ⎦ 2 2 Var [ X i ] = E ⎡ X i ⎤ − { E [ X i ]} = 1.000] = 1 – P[S ≤ 110.81 ⎣ ⎦ Since X 1 . Now under the assumptions given.100 .3) = 1.. E [ X i ] = ( 0 )( 0. X 100 denote the number of pensions that will be provided to each new recruit.1 ⎪ ⎩2 with probability ( 0.000...1) + ( 2 ) ( 0..000 Moreover. Since x is exponential with parameter 1000. and assume the claims of each policy are independent of the others then E[S] = 100 E[X] = (100)(1000) and Var[S] = 100 Var[X] = (100)(1.4 = 0.81) = 81 Consequently.841 ≈ 0.7 .4 )( 0.3 . 2 2 2 2 2 E ⎡ X i ⎤ = ( 0 ) ( 0...000. if we denote total claims by S. Now if 100 policies are sold. then Total Premium Collected = 100(1.000 . Var[ X ] = 1000 and P = 100 + E[X] = 1..6 ) + (1) ( 0..7 ) = 0. Solution: B Denote the policy premium by P . 000 ⎤ ⎡ P[S ≥ 110.000) .25 ) = 0.. 86.5 − 70 ⎤ Pr [ S ≤ 90..159 .3) = 0.100) = 110..28] = 0. Therefore..3 − ( 0.. + E [ X 100 ] = 100 ( 0. ⎧0 with probability 1 − 0. 000 ⎣ ⎦ – 0..6 ⎪ X i = ⎨1 with probability ( 0. Solution: E Let X 1 . 110.75 ) = 0. Therefore. it follows from what we are given that E[X] = 1000. ⎡ S − 70 90.3 for i = 1.
We are given X is uniformly distributed on (−2.5)3 =2. 1⎤ 0. It follows that μ x = E[X] = 0 σx2 = Var[X] = E[X2] = x2 x3 dx = ∫ 5 15 −2.2] – 1 = 2(0.5 = 2(2. That is.2] – 1 + P[Z ≤ 1.87.2] = P[Z ≤ 1.25 ⎤ ⎡ 1 ⎡ −0.2083 ⎦ 1.2083 . the difference between the means of the true and rounded ages. X has pdf f(x) = 1/5.2] – P[Z ≤ – 4⎦ 0. 88.5 2.2 ≤ Z ≤ 1.5 . The problem statement implies that the respective distribution functions for X and Y are F ( x ) = 1 − e− x / 6 . Solution: D Let X denote the difference between true and reported age.083 15 σx =1. has a 1.5 −2.25 P ⎢ − ≤ X 48 ≤ ⎥ = P ⎢ ≤Z≤ = P[−1.443 Now X 48 .2083 ⎥ ⎣ 4 ⎣ 0. y > 0 Therefore.2] = 2P[Z ≤ 1.443 = distribution that is approximately normal with mean 0 and standard deviation 48 0. x > 0 and G ( y ) = 1 − e− y / 3 .8849) – 1 = 0. and let Y denote the waiting time for a first claim from a bad driver. Pr ⎡( X ≤ 3) ∩ (Y ≤ 2 ) ⎤ = Pr [ X ≤ 3] Pr [Y ≤ 2] ⎣ ⎦ = F ( 3) G ( 2 ) = (1 − e −1/ 2 )(1 − e −2 / 3 ) = 1 − e−2 / 3 − e−1/ 2 + e−7 / 6 37 of 65 .77 . Therefore. Solution: C Let X denote the waiting time for a first claim from a good driver. −2.5.5 < x < 2.2] = P[Z ≤ 1.5) .5 2.2.
Solution: B ⎧ 6 (50 − x − y ) ⎪ We are given that f ( x. Then the joint pdf of T1 and T2 is ⎛1 ⎞⎛ 1 ⎞ 1 f (t1 . 0 < t2 < ∞ and we need to find ⎝2 ⎠⎝ 3 ⎠ 6 P[T2 < T1] = ∞ ∞ t1 1 −t / 2 −t / 3 ⎡ 1 − t / 2 − t / 3 ⎤ t1 ∫ ∫ 6e 1 e 2 dt2 dt1 = ∫ ⎢ − 2 e 1 e 2 ⎥ 0 dt1 ⎦ 0 0 0 ⎣ ∞ ∞ ∞ 3 2 ⎡ 1 − t1 / 2 1 − t1 / 2 − t1 / 3 ⎤ ⎡ 1 − t1 / 2 1 −5t1 / 6 ⎤ ⎡ − t1 / 2 3 −5t1 / 6 ⎤ + e = ∫⎢ e − e e ⎥ dt1 = ∫ ⎢ e − e ⎥ = 1− 5 = 5 ⎥ dt1 = ⎢ −e 5 2 2 2 2 ⎣ ⎦0 ⎦ ⎦ 0 ⎣ 0 ⎣ = 0. and let T2 be the time until the next Deluxe policy claim. note that P[X + Y > 1] 1 1 2⎤ ⎡ 2x + 2 − y ⎤ ⎡1 = ∫∫⎢ ⎥dydx = ∫ ⎢ 2 xy + 2 y − 8 y ⎥ 1− x dx 4 ⎦ ⎦ 0 1− x ⎣ 0 ⎣ = = 1 1 1 1 ⎡ 2⎤ ∫ ⎢ x + 1 − 2 − 2 x(1 − x) − 2 (1 − x) + 8 (1 − x) ⎥ dx = ⎦ 0 ⎣ 1 1 2 1 2 ∫ ⎢x + 2 x ⎣ 0 1 ⎡ 1 2 1 1 1 ⎤ + − x + x 2 ⎥ dx 8 4 8 ⎦ ∫ ⎢8 x ⎣ 0 1 ⎡5 2 + 3 1 ⎤ 3 1⎤ 5 3 1 17 ⎡5 x + ⎥ dx = ⎢ x 3 + x 2 + x ⎥ = + + = 8 8 ⎦ 0 24 8 8 24 4 8⎦ ⎣ 24 1 38 of 65 . t2 ) = ⎜ e− t1 / 2 ⎟ ⎜ e− t2 / 3 ⎟ = e− t1 / 2 e− t2 / 3 . 30) (30. 20) 50 x 6 We conclude that P[X > 20 ∩ Y > 20] = ∫ 125.89. 91. 0 < t1 < ∞ . Solution: C Let T1 be the time until the next Basic Policy claim. Solution: D We want to find P[X + Y > 1] . To this end. 000 ⎪0 ⎩ for 0 < x < 50 − y < 50 otherwise and we want to determine P[X > 20 ∩ Y > 20] .4 . 90. In order to determine integration limits. y ) = ⎨125. 000 20 30 50 − x 20 ∫ (50 − x − y ) dy dx . consider the following diagram: y 50 x>20 y>20 (20.
Then the graph below illustrates the region over which X and Y differ by less than 20: Based on the graph and the uniform distribution: Pr ⎡ X − Y < 20 ⎤ = ⎣ ⎦ Shaded Region Area ( 2200 − 2000 ) 2 = 2002 − 2 ⋅ 1 2 (180 ) 2 2002 1802 2 = 1 − ( 0.92.19 2 200 More formally (still using symmetry) Pr ⎡ X − Y < 20 ⎤ = 1 − Pr ⎡ X − Y ≥ 20 ⎤ = 1 − 2 Pr [ X − Y ≥ 20] ⎣ ⎦ ⎣ ⎦ = 1− 2200 1 1 x − 20 dydx = 1 − 2 ∫ y 2000 dx 2 2020 2000 200 2020 200 2 2200 2 1 2 = 1− x − 20 − 2000 ) dx = 1 − x − 2020 ) 2 ∫ 2020 ( 2 ( 200 200 = 1 − 2∫ 2200 ∫ 2 x − 20 2200 2020 ⎛ 180 ⎞ = 1− ⎜ ⎟ = 0.19 ⎝ 200 ⎠ 39 of 65 . Solution: B Let X and Y denote the two bids.9 ) = 0.
93. respectively. Pr ( Total Benefit Paid Does not Exceed 5) = Pr ( 0 < X < 6. 0 < x < 10 . However. t2 ) denote the joint density function of T1 and T2 .5 + + = 0.295 100 100 100 94. it is simpler to determine the portion of the 10 x 10 square that is shaded in the graph above. The domain of f is pictured below: Now the area of this domain is given by 1 2 A = 62 − ( 6 − 4 ) = 36 − 2 = 34 2 40 of 65 . 2 < Y < 7 ) + Pr (1 < X < 6. That is. 0 < y < 10 100 We could integrate f over the shaded region in order to determine the desired probability. y ) = . The shaded portion of the graph below shows the region over which the total benefit paid to the family does not exceed 5: We can also infer from the graph that the uniform random variables X and Y have joint 1 density function f ( x. 2 < Y < 8 − X ) = ( 6 )( 2 ) + (1)( 5 ) + (1 2 )( 5)( 5 ) = 100 100 100 12 5 12. 0 < Y < 2 ) + Pr ( 0 < X < 1. since X and Y are uniform random variables. Solution: C Define X and Y to be loss amounts covered by the policies having deductibles of 1 and 2. Solution: C Let f ( t1 .
However. f ( t1 .7 3 ⎦⎭ ⎩ 17 34 ⎣ 95.98 ) = 0. t2 ) = E ⎡ et1W +t2 Z ⎤ = E ⎡e 1 ( ) 2 ( ) ⎤ = E ⎡e( 1 2 ) e( 1 2 ) ⎤ ⎣ ⎦ ⎣ ⎦ ⎣ ⎦ = E ⎡ e( 1 ⎣ t − t2 ) X ⎤ E ⎡ e( t1 +t2 )Y ⎤ = e 2 ⎦ ⎣ ⎦ 1 ( t1 −t2 )2 1 e2 ( t1 + t2 )2 = e2 1 (t 2 2 1 − 2 t1t2 + t2 ) 1 (t 2 e 2 2 1 + 2 t1t2 + t2 ) = et1 +t2 2 2 96. t2 ) = ⎨ 34 ⎪0 elsewhere ⎩ and E [T1 + T2 ] = E [T1 ] + E [T2 ] = 2 E [T1 ] (due to symmetry) 6 1 6 10 −t1 1 6 ⎧ 4 ⎡t ⎤ ⎡t ⎧ 4 ⎫ = 2 ⎨ ∫ t1 ∫ dt2 dt1 + ∫ t1 ∫ dt2 dt1 ⎬ = 2 ⎨ ∫ t1 ⎢ 2 6 ⎥ dt1 + ∫ t1 ⎢ 2 0 0 34 4 0 4 34 ⎩ 0 ⎭ ⎣ 34 ⎩ 0 ⎣ 34 ⎦ 6 1 ⎧ 3t12 ⎧ 4 3t1 = 2 ⎨∫ dt1 + ∫ (10t1 − t12 ) dt1 ⎫ = 2 ⎨ 34 ⎬ 4 34 ⎩ 0 17 ⎭ ⎩ 4 0 10 − t1 0 ⎤ ⎫ ⎥ dt1 ⎬ ⎦ ⎭ + 1 ⎛ 2 1 3⎞ 6⎫ ⎜ 5t1 − t1 ⎟ 4 ⎬ 34 ⎝ 3 ⎠ ⎭ 64 ⎤ ⎫ ⎧ 24 1 ⎡ = 2 ⎨ + ⎢180 − 72 − 80 + ⎥ ⎬ = 5. t1 + t2 < 10 ⎪ Consequently. 41 of 65 .02 ) = ( 0. Solution: E t X +Y + t Y − X t −t X t +t Y M ( t1 . 0 < t1 < 6 .65 . he may be required to refund 100 to one passenger if all 21 ticket holders show up. Since passengers show up or do not show up independently of one another. the probability that 21 21 all 21 passengers will show up is (1 − 0. Solution: E Observe that the bus driver collect 21x50 = 1050 for the 21 tickets he sells. 0 < t2 < 6 .⎧1 .65 ) = 985 . Therefore. the tour operator’s expected revenue is 1050 − (100 )( 0.
Otherwise. Since P[Y = 1] = P[X1 = 1 ∩ X2 = 1 ∩ X3 = 1] = P[X1 = 1] P[X2 = 1] P[X3 = 1] = (2/3)3 = 8/27 . ⎧ 19 for y = 0 ⎪ 27 ⎪ ⎪8 We conclude that g ( y ) = ⎨ for y = 1 27 ⎪ otherwise ⎪0 ⎪ ⎩ 19 8 t and M(t) = E ⎡e yt ⎤ = ⎣ ⎦ 27 + 27 e 42 of 65 . L) t1 98. Note that Y = 1 if and only if X1 = X2 = X3 = 1 .97. 0 ≤ t1 ≤ t2 ≤ L . t2) = 2/L2. L t2 2 2 2 2 2 Therefore. Solution: A Let g(y) be the probability function for Y = X1X2X3 . Y = 0 . E[T1 + T2 ] = ∫ ∫ (t1 + t2 ) 2 dt1dt2 = L 0 0 t2 ⎧L 3 ⎫ ⎧L 3 ⎫ ⎪ ⎡ t1 ⎪ 2 ⎪ ⎛ t2 ⎪ 2 ⎤ 3⎞ ⎨ ∫ ⎢ + t2 t1 ⎥ dt1 ⎬ = 2 ⎨ ∫ ⎜ + t2 ⎟ dt2 ⎬ ⎪0 ⎣ 3 ⎪ L ⎪0 ⎝ 3 ⎦0 ⎠ ⎪ ⎩ ⎭ ⎩ ⎭ 4 L L 2 4 3 2 ⎡t ⎤ 2 = 2 ∫ t2 dt2 = 2 ⎢ 2 ⎥ = L2 3 L 03 L ⎣ 3 ⎦0 t2 2 L2 (L. Solution: C We are given f(t1.
1Y ] = Var X + Var ⎡(1. 000 + 2 Cov ( X . we see Var [ X+Y ] = Var [ X ] + Var [ Y ] = 100 + 100 = 200 43 of 65 .1) Cov ( X . and so Cov ( X .1. 101. Cov ( aX . Y ) = 1000. Solution: C We use the relationships Var ( aX + b ) = a 2 Var ( X ) .58 .1) Var Y + 2 (1.300. Y ) . 000 = Var ( X + Y ) = 5000 + 10. bY ) = ab Cov ( X . Solution: B Note P(X = 0) = 1/6 P(X = 1) = 1/12 + 1/6 = 3/12 P(X = 2) = 1/12 + 1/3 + 1/6 = 7/12 .99.1Y ) + 100 ⎤ ⎣ ⎦ ⎣ ⎦ = Var [ X + 1. 102. Therefore. E[X] = (0)(1/6) + (1)(3/12) + (2)(7/12) = 17/12 E[X2] = (0)2(1/6) + (1)2(3/12) + (2)2(7/12) = 31/12 Var[X] = 31/12 – (17/12)2 = 0. Y ) = 5000 + 12. We want to find Var ⎡( X + 100 ) + 1. and Var ( X + Y ) = Var ( X ) + Var (Y ) + 2 Cov ( X . Var [ X ] = Var [Y ] = 102 = 100 Then assuming that X and Y are independent.100 + 2200 = 19. 2 100. Y ) .1) Y ⎤ + 2 Cov ( X . First we observe 17. Y ) .1Y ) ⎣ ⎦ = Var X + (1. Now the variance of an exponential random variable with mean β is β 2 . Solution: E Let X and Y denote the times that the two backup generators can operate.1Y ⎤ = Var ⎡( X + 1. Solution: D Note that due to the independence of X and Y Var(Z) = Var(3X − Y − 5) = Var(3X) + Var(Y) = 32 Var(X) + Var(Y) = 9(1) + 2 = 11 .
X 2 .414 * Uses that if X has an exponential distribution with mean μ Pr ( X ≤ x ) = 1 − Pr ( X ≥ x ) = 1 − ∫ x 1 μ e − t μ dt = 1 − ( −e − t μ ) ∞ = 1 − e− x μ x 104. let Y = Max ( X 1 . Solution: B Let us first determine k: 1= ∫ Then 1 0 ∫ 1 0 kxdxdy = ∫ k =2 1 1 1k 1 2 1 k kx  0 dy = ∫ dy = 0 2 0 2 2 1 E [ X ] = ∫ ∫ 2 x 2 dydx = ∫ 2 x 2 dx = 0 0 0 1 2 31 2 x 0= 3 3 1 2 1 1 y 0= 2 2 E [Y ] = ∫ ∫ y 2 x dxdy = ∫ ydy = 0 0 0 1 1 1 E [ XY ] = ∫ = 1 0 ∫ 1 0 2x 2 ydxdy = ∫ 2 2 1 2 1 y 0 = = 6 6 3 12 2 3 1 x y  0 dy = ∫ ydy 0 3 0 3 1 1 ⎛ 2 ⎞⎛ 1 ⎞ 1 1 Cov [ X . It follows that X and Y are independent.103. and theft. In Pr [Y > 3] = 1 − Pr [Y ≤ 3] = 1 − Pr [ X 1 ≤ 3] Pr [ X 2 ≤ 3] Pr [ X 3 ≤ 3] = 1 − (1 − e −3 ) 1 − e ( −3 1. addition.y) = g(x)h(x) In other words. Therefore. Then Solution: E Let X 1 . fire. Y ] = E [ XY ] − E [ X ] E [Y ] = − ⎜ ⎟ ⎜ ⎟ = − = 0 3 ⎝ 3 ⎠⎝ 2 ⎠ 3 3 (Alternative Solution) Define g(x) = kx and h(y) = 1 .5 = 1 − (1 − e −3 )(1 − e −2 )(1 − e ) ) (1 − e ) −3 2. Y] = 0 . X 2 . f(x. 44 of 65 . respectively. X 3 ) .4 −5 4 ∞ * = 0.y) can be written as the product of a function of x alone and a function of y alone. Then f(x. and X 3 denote annual loss due to storm. Cov[X.
0 < x < 12 . Solution: A The calculation requires integrating over the indicated region. 45 of 65 . Therefore.04 27 ⎝ 45 ⎠⎝ 5 ⎠ 106.y) = f2(yx) f1(x) = (1/x)(1/12). E(X ) = ∫ E (Y ) = ∫ 1 0 ∫ 2x x 14 8 2 x y dy dx = ∫ x 2 y 2 0 3 3 2x 2x x 1 4 4 4 dx = ∫ x 2 ( 4 x 2 − x 2 ) dx = ∫ 4 x 4 dx = x5 = 0 3 0 5 0 5 1 1 1 1 1 0 ∫ 2x x 18 8 2 xy dy dx = ∫ xy 3 0 9 3 2x x 1 56 8 56 5 56 dy dx = ∫ x ( 8 x3 − x3 ) dx = ∫ x 4 dx = x = 0 9 0 9 45 0 45 2x E ( XY ) = ∫ 1 0 ∫ x 18 8 2 2 x y dy dx = ∫ x 2 y 3 0 9 3 x dx = ∫ 1 56 56 28 8 2 x ( 8 x3 − x3 ) dx = ∫ x5 dx = = 0 9 0 9 54 27 1 Cov ( X . 0 < y < x. Solution: C The joint pdf of X and Y is f(x.Y) = E[XY] – E[X]E[Y] = 24 − (3)(6) = 24 – 18 = 6 . 12 x 12 12 1 y x x x 2 12 E[X] = ∫ ∫ x ⋅ =6 dydx = ∫ dx = ∫ dx = 12 x 12 0 12 24 0 0 0 0 0 12 12 ⎡ y2 ⎤ y x x 2 12 144 E[Y] = ∫ ∫ =3 dydx = ∫ ⎢ dx = ∫ dx = = 12 x 24 x ⎥ 0 24 48 0 48 ⎦ 0 0 0 ⎣ 0 x 12 x E[XY] = 12 x 12 12 2 ⎡ y2 ⎤ y x x3 12 (12)3 = 24 dydx = ∫ ⎢ ⎥ dx = ∫ dx = = ∫ ∫ 12 24 72 0 72 ⎣ 24 ⎦ 0 0 0 0 0 x Cov(X.105. Y ) = E ( XY ) − E ( X ) E (Y ) = 28 ⎛ 56 ⎞⎛ 4 ⎞ − ⎜ ⎟⎜ ⎟ = 0.
Y ) = 107. Alternate solution: We are given the following information: C1 = X + Y C2 = X + 1.4 2 Var Y = E (Y 2 ) − ( E (Y ) ) = 51.2Y ) + Cov ( Y. To this end. Solution: A Cov ( C1 .2 ) 7 ) ⎣ ⎦ ⎣ ⎦ = 27.2Cov ( X .2Y ) = Var X + Cov ( X .2Y ] ⎣ ⎦ = E ⎡ X 2 + 2.6 2 2 Cov ( C1 .1.6 ) + 1.2 E [ XY ] + 1. C2 ) = Cov ( X + Y .4 ) = 8.4 + 2.4 2 Var ( X + Y ) = Var X + Var Y + 2 Cov ( X .2 E ⎡Y 2 ⎤ − ( 5 + 7 ) ( 5 + (1.72 Therefore.2 E [ XY ] − 71.2 (1.2 XY + 1.2Y E[X ] = 5 E [Y ] = 7 E ⎡ X 2 ⎤ = 27.2Y 2 ⎤ − ( E [ X ] + E [Y ]) ( E [ X ] + 1. we need to calculate E [ XY ] first.4 + 2.2Y ) = E ⎡( X + Y )( X + 1.2 E [ XY ] + 1.2Y ) ⎤ − E [ X + Y ]i E [ X + 1.4 ⎣ ⎦ Var [ X + Y ] = 8 Now we want to calculate Cov ( C1 .4 − 52 = 2.2 ( 2. Y ) + 1.2VarY Var X = E ( X 2 ) − ( E ( X ) ) = 27.4 − 7 2 = 2.1.2Y ) = Cov ( X . Y ) + 1.107.4 ⎣ ⎦ E ⎡Y 2 ⎤ = 51.2 E [Y ]) ⎣ ⎦ = E ⎡ X 2 ⎤ + 2. Y ) + 1. C2 ) = Cov ( X + Y . X + 1. Y ) 1 ( Var ( X + Y ) − Var X − Var Y ) = 1 ( 8 − 2.4) = 1. X + 1.2VarY = Var X + 2.4 − 2.2 ( 51.4 ) = 2.4 ) − (12 )(13.2 Cov ( X .8 Cov ( X . X ) + Cov ( X . C2 ) = 2. X ) + Cov (Y . observe 46 of 65 .
x > 0 It follows that the density of X is given by 1 1 − x − x ⎤ d ⎡ g ( x) = 1 − 2e 2 + e − x ⎥ = e 2 − e − x . x > 0 ⎢ dx ⎣ ⎦ − 1 x − 1 x 47 of 65 .2 Finally. Cov ( C1.4 + 2 E [ XY ] + 51. Pr [ X ≤ x ] = Pr [ 2T1 + T2 ≤ x ] 1 ⎡ x ( x − t2 ) ⎤ e − t1 e −t2 dt1dt2 = ∫ e − t2 ⎢ −e − t1 2 ⎥ dt2 0 ∫ 0 ⎢ ⎥ 0 ⎣ ⎦ 1 1 1 1 − x + t2 ⎤ − x − t2 ⎞ x x⎛ ⎡ = ∫ e − t2 ⎢1 − e 2 2 ⎥ dt2 = ∫ ⎜ e − t2 − e 2 e 2 ⎟dt2 0 0 ⎣ ⎦ ⎝ ⎠ 1 1 1 1 1 − x − t2 ⎤ − x − x − x ⎡ x = ⎢ − e − t 2 + 2e 2 e 2 ⎥ 0 = − e − x + 2 e 2 e 2 + 1 − 2 e 2 ⎣ ⎦ =∫ x 1 ( x − t2 ) 2 0 = 1 − e − x + 2e − x − 2e 2 = 1 − 2e 2 + e − x .C2 ) = 2.2 2 8 = Var [ X + Y ] = E ⎡( X + Y ) ⎤ − ( E [ X + Y ]) ⎣ ⎦ = E ⎡ X 2 + 2 XY + Y 2 ⎤ − ( E [ X ] + E [Y ]) ⎣ ⎦ = E ⎡ X 2 ⎤ + 2 E [ XY ] + E ⎡Y 2 ⎤ − ( 5 + 7 ) ⎣ ⎦ ⎣ ⎦ = 27.8 E [ XY ] = ( 8 + 65.6 ) − 71. t2 ) = e − t1 e− t2 . t1 > 0 .2 ( 36.2 ) 2 = 36. Solution: A The joint density of T1 and T2 is given by f ( t1 .6 2 2 108.72 = 8.4 − 144 = 2 E [ XY ] − 65. t2 > 0 Therefore.
f(x) be the density function of X. Pr ⎡Y < X X = 1 3⎤ = ∫ ⎣ ⎦ 0 2 4 13 = 0 1 4 48 of 65 . ⎛1 ⎞ 1 g ( u. y ) 2 ⎛ f ⎜y x= ⎟= . v be annual premiums. 3⎠ f x (1 3) 3 ⎝ 23 23 2 3 16 ⎛1⎞ f x ⎜ ⎟ = ∫ 24 (1 3) y dy = ∫ 8 y dy = 4 y 2 = 0 9 0 ⎝ 3⎠ 0 ⎛ 1⎞ 9 9 2 f (1 3. f ( x ) = F ' ( x ) = 2 ( 2 x + 1) ∞ 110. 0< y< . Then since U and V are independent. v ) = ( e−u ) ⎜ e− v / 2 ⎟ = e−u e− v / 2 . 0 < u < ∞ . y ) = y . Solution: C Note that the conditional density function 1 ⎞ f (1 3. v) be the joint density function of U and V. v )dudv = ∫ ∫ 0 0 0 0 2 ∞ ∞⎛ 1 1 1 ⎞ vx = ∫ − e − u e − v / 2  0 dv = ∫ ⎜ − e − vx e − v / 2 + e− v / 2 ⎟ dv 0 0 2 2 ⎝ 2 ⎠ ∞⎛ 1 1 ⎞ = ∫ ⎜ − e − v( x +1/ 2) + e − v / 2 ⎟ dv 0 2 ⎝ 2 ⎠ 1 ⎡ 1 ⎤ e − v( x +1/ 2) − e − v / 2 ⎥ = − =⎢ +1 2x + 1 ⎣ 2x + 1 ⎦0 2 Finally. g(u. and F(x) be the distribution function of X. 0 < y < It follows that f ⎜ y x = ⎟ = 3 ⎠ 16 2 3 ⎝ 139 9 y dy = y 2 Consequently. Solution: B Let u be annual claims.109. 0 < v < ∞ ⎝2 ⎠ 2 and ⎡u ⎤ F ( x ) = Pr [ X ≤ x ] = Pr ⎢ ≤ x ⎥ = Pr [U ≤ Vx ] ⎣v ⎦ ∞ vx ∞ vx 1 e −u e − v / 2 dudv = ∫ ∫ g ( u .
0 < x < 1 f ( x.111.96 + 0.05 2 100 2 ⎤ 0.4167 . Solution: E 3 f ( 2. y ) = ∞ 2 1 − 4 −1 2 −1 y ( ) = y −3 4 ( 2 − 1) 2 ∞ 1 1 1 f x ( 2 ) = ∫ y −3 dy = − y −2 = 2 4 4 1 1 Finally.96 = = 0.05X = 0.0103 0.01 = 0.9897 Pr [ H ] 0.05 1 1 5 ⎡ 20 = + = = 0.10 f(yx = 0.01 ⎥ 3 ⎦ 0. y ) Pr ⎡1 < Y < 3 X = 2 ⎤ = ∫ dy ⎣ ⎦ 1 f x ( 2) f ( 2.97 Pr ⎡ H ∩ W c ⎤ ⎣ ⎦ Pr [ H ] = 0.10) = ⎢ 3 ⎣ 0.97 ⎡ Pr ⎣W c  H ⎤ = ⎦ 49 of 65 . Now fx(x) = ∫ (2 x + 2 y )dy = ⎡ 2 xy + y 2 ⎤ ⎣ ⎦ 0 x x 0 = 2x2 + x2 = 3x2. y ) 2( x + y ) 2 ⎛ 1 y ⎞ = = ⎜ + 2 ⎟.10] = ∫ [10 + 100 y ] dy = ⎢ y + 3 3 3 12 12 ⎣3 ⎦0 0 so f(yx) = 113. Solution: E Let W = event that wife survives at least 10 years H = event that husband survives at least 10 years B = benefit paid P = profit from selling policies Then Pr [ H ] = P [ H ∩ W ] + Pr ⎡ H ∩ W c ⎤ = 0.01 = 0.97 ⎣ ⎦ and Pr [W  H ] = Pr [W ∩ H ] 0. 0 < y < x 3x 2 3⎝ x x ⎠ f x ( x) 2⎡ 1 y ⎤ 2 + = [10 + 100 y ] . y ⎥ P[Y < 0. 0 < y < 0.1 0. Solution: D We are given that the joint pdf of X and Y is f(x.y) = 2(x+y). 0 < y < x < 1 . Pr ⎡1 < Y < 3 X = 2 ⎤ = ⎣ ⎦ ∫ 3 1 1 −3 y dy 3 1 8 2 = − y −2 = 1 − = 1 1 9 9 4 112.
It follows that E [ P ] = E [1000 − B ] = 1000 − E [ B ] = 1000 − ( 0 ) Pr [W  H ] + (10, 000 ) Pr ⎡W c  H ⎤ ⎣ ⎦ = 1000 − 10, 000 ( 0.0103) = 1000 − 103 = 897
{
}
114. Solution: C Note that P(Y = 0⏐X = 1) =
= 0.286 P(Y = 1⏐X=1) = 1 – P(Y = 0 ⏐ X = 1) = 1 – 0.286 = 0.714 Therefore, E(Y⏐X = 1) = (0) P(Y = 0⏐X = 1) + (1) P(Y = 1⏐X = 1) = (1)(0.714) = 0.714 E(Y2⏐X = 1) = (0)2 P(Y = 0⏐X = 1) + (1)2 P(Y = 1⏐X = 1) = 0.714 Var(Y⏐X = 1) = E(Y2⏐X = 1) – [E(Y⏐X = 1)]2 = 0.714 – (0.714)2 = 0.20 115. Solution: A Let f1(x) denote the marginal density function of X. Then Consequently,
f1 ( x ) = ∫
x +1 x
P( X = 1, Y = 0) P( X = 1, Y = 0) 0.05 = = P( X = 1) P( X = 1, Y = 0) + P ( X = 1, Y = 1) 0.05 + 0.125
2 xdy = 2 xy  x +1 = 2 x ( x + 1 − x ) = 2 x x
,
0< x<1
f ( x, y ) ⎧1 if: x < y < x + 1 =⎨ f1 ( x ) ⎩0 otherwise x +1 1 1 1 1 1 1 1 2 E [Y  X ] = ∫ ydy = y 2  x +1 = ( x + 1) − x 2 = x 2 + x + − x 2 = x + x x 2 2 2 2 2 2 2 x +1 1 1 1 3 E ⎡Y 2  X ⎤ = ∫ y 2 dy = y 3  x +1 = ( x + 1) − x3 x ⎣ ⎦ x 3 3 3 1 1 1 1 = x3 + x 2 + x + − x3 = x 2 + x + 3 3 3 3 f ( y x ) =
2 2 2 2
1 ⎛ 1⎞ Var [Y  X ] = E ⎡Y  X ⎤ − { E [Y  X ]} = x + x + − ⎜ x + ⎟ ⎣ ⎦ 3 ⎝ 2⎠ 1 1 1 = x2 + x + − x2 − x − = 3 4 12
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116.
Solution: D Denote the number of tornadoes in counties P and Q by NP and NQ, respectively. Then E[NQNP = 0] = [(0)(0.12) + (1)(0.06) + (2)(0.05) + 3(0.02)] / [0.12 + 0.06 + 0.05 + 0.02] = 0.88 E[NQ2NP = 0] = [(0)2(0.12) + (1)2(0.06) + (2)2(0.05) + (3)2(0.02)] / [0.12 + 0.06 + 0.05 + 0.02] = 1.76 and Var[NQNP = 0] = E[NQ2NP = 0] – {E[NQNP = 0]}2 = 1.76 – (0.88)2 = 0.9856 .
117. Solution: C The domain of X and Y is pictured below. The shaded region is the portion of the domain over which X<0.2 .
Now observe Pr [ X < 0.2] = ∫
0.2 0
∫
1− x
0
6 ⎡1 − ( x + y ) ⎤dydx = 6 ∫ ⎣ ⎦ 0
0.2
1 2⎤ ⎡ ⎢ y − xy − 2 y ⎥ dx ⎣ ⎦0
1− x
0.2 ⎡ 0.2 ⎡ 1 1 2⎤ 2 2⎤ = 6∫ ⎢1 − x − x (1 − x ) − (1 − x ) ⎥ dx = 6 ∫ ⎢(1 − x ) − (1 − x ) ⎥ dx 0 0 2 2 ⎣ ⎦ ⎣ ⎦ 0.2 1 2 3 3 = 6∫ (1 − x ) dx = − (1 − x )  0.2 = − ( 0.8) + 1 = 0.488 0 0 2
118. Solution: E The shaded portion of the graph below shows the region over which f ( x, y ) is nonzero:
We can infer from the graph that the marginal density function of Y is given by
g ( y ) = ∫ 15 y dx = 15 xy
y y y
= 15 y
y
(
y − y = 15 y 3 2 (1 − y1 2 ) , 0 < y < 1
)
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12 ⎧ 32 ⎪15 y (1 − y ) , 0 < y < 1 or more precisely, g ( y ) = ⎨ otherwise ⎪0 ⎩
119. Solution: D The diagram below illustrates the domain of the joint density f ( x, y ) of X and Y .
We are told that the marginal density function of X is f x ( x ) = 1 , 0 < x < 1 while f y x ( y x ) = 1 , x < y < x + 1 ⎧1 It follows that f ( x, y ) = f x ( x ) f y x ( y x ) = ⎨ ⎩0 Therefore, Pr [Y > 0.5] = 1 − Pr [Y ≤ 0.5] = 1 − ∫ = 1− ∫
1 2 1 2 0
if 0 < x < 1 , x < y < x + 1 otherwise
∫
1 x
2
dydx
1 2 ⎤ 12 1 1 7 ⎛1 ⎞ ⎡1 ⎜ − x ⎟ dx = 1 − ⎢ x − x ⎥ 0 = 1 − + = 0 0 2 ⎦ 4 8 8 ⎝2 ⎠ ⎣2 [Note since the density is constant over the shaded parallelogram in the figure the solution is also obtained as the ratio of the area of the portion of the parallelogram above y = 0.5 to the entire shaded area.] y
1 2 x
dx = 1 − ∫
1
2
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Solution: C The marginal density of X is given by 1 1 1 ⎛ xy 3 ⎞ 1 ⎛ x⎞ fx ( x) = ∫ 10 − xy 2 ) dy = ⎜ 10 y − ( ⎟ = ⎜10 − ⎟ 0 64 64 ⎝ 3 ⎠ 0 64 ⎝ 3⎠ Then E ( X ) = ∫ x f x ( x)dx = ∫ 2 10 10 2 1 1 ⎛ 2 x3 ⎞ 1 ⎛ x2 ⎞ ⎜ 5x − ⎟ ⎜10 x − ⎟ dx = 64 ⎝ 9 ⎠2 64 ⎝ 3⎠ 10 = 1 ⎡⎛ 1000 ⎞ ⎛ 8 ⎞⎤ ⎢⎜ 500 − 9 ⎟ − ⎜ 20 − 9 ⎟ ⎥ = 5. In addition. denote the time required to process a claim by T. ⎧3 2 1 3 ⎪ x ⋅ = x .17 .120.778 64 ⎣⎝ ⎠ ⎝ ⎠⎦ 53 of 65 . ⎩ Now we can find P[T ≥ 3] = 4 4 2 4 3 12 ⎡3 ⎤ ⎛ 12 3 ⎞ ⎡12 1 ⎤ ⎛ 36 27 ⎞ xdxdt = ∫ ⎢ x 2 ⎥ dt = ∫ ⎜ − t 2 ⎟ dt = ⎢ − t 3 ⎥ = − 1 − ⎜ − ⎟ ∫ t∫2 8 16 ⎦ t / 2 16 64 ⎠ 4 ⎣16 64 ⎦ 3 ⎝ 16 64 ⎠ 3 / 3 ⎣ 3⎝ = 11/64 = 0. otherwise. x < t < 2 x. Solution: A We are given that X denotes loss. t ) = ⎨ 8 x 8 ⎪0. t t = 2x 4 2 4 3 2 1 1 2 t=x x 121. 0 ≤ x ≤ 2 Then the joint pdf of X and T is f ( x.
We conclude that E(Y) = (6/2) (1/2) – (6/3) (1/3) = 3/2 – 2/3 = 0 ∞ 9/6 − 4/6 = 5/6 = 0. Solution: C Observe Pr [ 4 < S < 8] = Pr ⎡ 4 < S < 8 N = 1⎤ Pr [ N = 1] + Pr ⎡ 4 < S < 8 N > 1⎤ Pr [ N > 1] ⎣ ⎦ ⎣ ⎦ −8 1 −4 1 −1 = e 5 − e 5 + e 2 − e −1 * 3 6 = 0.122 *Uses that if X has an exponential distribution with mean μ ( ) ( ) Pr ( a ≤ X ≤ b ) = Pr ( X ≥ a ) − Pr ( X ≥ b ) = ∫ a ∞ 1 μ e −t μ dt − ∫ b ∞ 1 μ e −t μ dt = e − a μ −e − b μ 54 of 65 . E(Y) = ∞ 6 6 –2y –3y ∫ 2 ye dy − 3 ∫ 3 y e dy 20 0 But ∫ 2 y e–2y dy and ∫ 3 y e–3y dy are equivalent to the means of exponential random 0 0 ∞ ∞ 0 ∞ ∫y f2(y) dy = ∫ (6 ye 0 ∞ −2 y − 6 ye −3 y ∞ ) dy = 6 ∫ ye 0 −2 y ∞ dy – 6 ∫y 0 e–3y dy = variables with parameters 1/2 and 1/3. ∫ 2 y e–2y dy = 1/2 0 ∞ and ∫ 3 y e–3y dy = 1/3 . 0 < y < ∞ ∞ 0 ∫e 0 y −x dx Therefore.83 . 123.122. respectively. Solution: D The marginal distribution of Y is given by f2(y) = ∫ 6 e e –x y –2y dx = 6 e –2y = −6 e–2y e–y + 6e–2y = 6 e–2y – 6 e–3y. In other words.
Because a location shift does not affect the variance. f X . Solution: A Because f(x.Y) is 0 < y < x < 1. the condition on X can be ignored and it suffices to just consider f ( y ) = 2e −2 y . Solution: E The support of (X. y ) = f ( y  x) f X ( x) = 2 on that support. 1) so that f ( x  y ) = By computation: f Y ( y ) = ∫ 2dx = 2 − 2 y ⇒ f ( x  y ) = y 1 1 for y < x < 1 . Because of the memoryless property of the exponential distribution.25.124.Y ( x. Thus. 1− y f X . X and Y are independent. It is clear geometrically (a flat joint density over the triangular region 0 < y < x < 1) that when Y = y we have X ~ U(y. the conditional density of Y is the same as the unconditional density of Y+3.y) is a cross product.y) can be written as f ( x) f ( y ) = e − x 2e −2 y and the support of f(x. the conditional variance of Y is equal to the unconditional variance of Y.Y ( x.5 and the variance of an exponential distribution is always equal to the square of its mean. y ) f Y ( y) = 2 1 = for y < x < 1 2 − 2y 1− y 55 of 65 . 125. Because the mean of Y is 0. the requested variance is 0.
For one loss there is no payout with probability 0. Thus p 0 + ( p 0 − c ) + ( p 0 − 2c ) + .25 * 0 + 0.25 and otherwise the payout is U(0. E[ X ] = 0.25 * 0 + 0.200.75 * 7500 = 5625 .126. E[ X 2 ] = 0.375 ..609. 15000 2 ) = 56. 120 120 120 6 p0 − 3c = ⎧6 p0 − 15c = 1 ⎪ ⎨ 2 ⎪2 p0 − c = 5 ⎩  127.75 * (7500 2 + Applying the CLT.781741613 < < 1. ⎡ ⎤ S − (200)(5625) P[1.000 . 56 of 65 .8575(10.069044968⎥ (200)(24.8201 from the provided table. Solution: C Using the notation of the problem. we know that p0 + p1 = p0 + p1 + p2 + p3 + p4 + p5 = 1 . so the variance of one claim is 12 Var ( X ) = E[ X 2 ] − E[ X ]2 = 24.375) ⎢ ⎥ ⎣ ⎦ which interpolates to 0.000.9626)=0. Then pn = p0 − nc for 1 ≤ n ≤ 5 . + ( p 0 − 5c ) = 6 p 0 − 15c = 1. 15000). Thus p0 = .000] = P ⎢− 1.250. Solving simultaneously 5 6 5 1 2 1 25 25 .000 < S < 1. Solution: D Because the number of payouts (including payouts of zero when the loss is below the deductible) is large.609.. So c = and 2 p0 = + = 60 5 60 60 120 1 12c = 5 17 15 32 We want p4 + p5 = ( p0 − 4c ) + ( p0 − 5c ) = + = = 0. Let pn − pn +1 = c for all n ≤ 4 . 2 and 5 2 Also p0 + p1 = p0 + ( p0 − c ) = 2 p0 − c = . So. ⇒ −6 p0 + 15c = −1 .267 . we can apply the central limit theorem and assume the total payout S is normal.
the conditional distribution of health care costs greater than 20 is the same as the unconditional distribution of health care costs. 130.5) [ X ] = 100E[(0. We observe that a reimbursement of 115 corresponds to health care costs of 150 (100% x (120 – 20) + 50% x (150 – 120)). (H – 11)% have both homeowners and auto insurance. Key: B Let H be the percentage of clients with homeowners insurance and R be the percentage of clients with renters insurance.5) ] = 100E[e ( X ln 0.5 ) X ] = 100M X (ln 0. G (115) = F (130) = 1 − e − 130 100 = 0. Because H = 2R.9 1 − 2 ln 0.5 57 of 65 . so (H + R – 19)% must equal 35%. Because 36% of clients do not have auto insurance and none have both homeowners and renters insurance. and because of the memoryless property of the exponential distribution.727 . Therefore.5) = 100 1 = 41. R must be 18%. which implies that 10% have both renters and auto insurance. but not auto insurance. which is 130 greater than the deductible of 20. Key: B The reimbursement is positive if health care costs are greater than 20. 129. we calculate that 8% (36% – 17% – 11%) must have renters insurance.128. Key: C E 100(0. (R – 8)% have both renters and auto insurance. and none have both homeowners and renters insurance.
140 1000 = 1− e (1. Solution: B Pr(man dies before age 50) = Pr(T < 50  T > 40) = Pr(40 < T < 50) F (50) − F (40) = Pr(T > 40) 1 − F (40) e 1−1. n 2 ) = e − n1 1 − e − n1 p1 (n1 ) conditional probability function is p 21 (n 2  n1 ) = ( ) n2 −1 . Solution: E p(n1 .150 1000 e 1−1. n2 ) = ∞ 3⎛1⎞ ⎜ ⎟ 4⎝4⎠ n1 −1 ∞ n2 =1 ∑ e −n1 1 − e −n1 ( ) n2 −1 = 3⎛1⎞ ⎜ ⎟ 4⎝4⎠ n1 −1 .131.0696) = 347.140 1000 = −e 1−1. n2 ) . Solution: C The number of defective modems is 20% x 30 + 8% x 50 = 10.96 58 of 65 . p1 (n1 ) where p1 (n1 ) is the marginal probability function of N 1 . and becomes e 2 when n1 = 2 . n2 =1 ∑ e (1 − e ) ∞ − n1 − n1 n2 −1 = 1 as the sum of the probabilities of a geometric random variable. 132. find the conditional probability function of N 2 given N 1 = n1 : p 21 (n 2  n1 ) = p1 (n1 ) = since n2 =1 ∑ p(n1 . ⎛10 ⎞⎛ 70 ⎞ ⎜ ⎟⎜ ⎟ ⎜ 2 ⎟⎜ 3 ⎟ The probability that exactly two of a random sample of five are defective is ⎝ ⎠⎝ ⎠ = 0.0696 Expected Benefit = 5000 Pr(man dies before age 50) = (5000) (0. The mean of this distribution is 1 / p = 1 / e − n1 = e n1 . The p (n1 .140 −1. sum the joint probability function over all possible values of N 2 obtaining First. ⎛ 80 ⎞ ⎜ ⎟ ⎜5⎟ ⎝ ⎠ 133.150 ) 1000 = 0.102 . To find the latter. which is the probability function of a geometric random variable with parameter p = e − n1 .
t = 0.134. we have that the relative frequency with which kingsized mattresses are sold is 3t and the relative frequency with which queensized mattresses are sold is (3t+t)/4.2 since t + 3t + t = 1. Solutions: C Letting t denote the relative frequency with which twinsized mattresses are sold.80. 59 of 65 . or t. Thus. The probability we seek is 3t + t = 0.
25 136. Y = 2 implies the first roll is not a 6 and the 6 second roll is a 6. 60 of 65 . This is the moment generating function of a discrete random variable that assumes the values 1.30e .8(8) = 6.135. and 0.30e + 0.50 + 0.2(1) + 0.30. Key: D X follows a geometric distribution with p = 1 . K(t) = t t 0. the moment generating function of X + Y equals K2(t). 0. E [X  X ≥ 3] = 1 + 2 = 6 + 2 = 8 . The value we seek is thus 0.30. where K(t) is the moment generating function common to X and Y. Thus. so E [X Y = 2] = 0. Key: E Var (N) = E [ Var ( N  λ )] + Var [ E ( N  λ )] = E (λ) + Var (λ) = 1.40 + 0.40. 0. Key: E Because X and Y are independent and identically distributed.6 p 137. and 1 with respective probabilities 0.75 = 2. This means a 5 is obtained for the first time on the first roll (probability = 20%) or a 5 is obtained for the first time on the third or later roll (probability = 80%).70.
P[X = n] is maximized at n = 3.42 + 0. the mean value of X and thus the expected operational time of the machine is 5.4) 2 (0.4 and r = 2 “successes” needed.4) (1 − 0. 61 of 65 . 5).5 ⋅0 + ⋅1 + ⋅ 2 = 0.49 0. given that the total loss due to hospitalizations from the accident is less than 1 is 139. the mode is 3. 0.6) P[ X = n] n −1 This ratio of “consecutive” probabilities is greater than 1 when n = 2 and less than 1 when n ≥ 3. Thus. respectively.09 for 0. the expected number of people in the car who are hospitalized. if the component represented by the random variable Y fails last.49 + 0. 0) and (5.09 ⋅ 0. 2 n−2 (n − 1)(0. Let X equal the number of hurricanes it takes for two losses to occur. However. 0).09 ⋅ 0.138.534 0.42 + 0.49 + 0. then the total loss will be less than 1.5.49 + 0. the probability that the total loss will be less than 1 is 0. 0.6) . Key: B The unconditional probabilities for the number of people in the car who are hospitalized are 0.6) n −1 n = = (0. 1 and 2.6) . for n ≥ 2. Key: D Suppose the component represented by the random variable X fails last.49. the unconditional expected operational time of the machine must be 5 as well. (10.42 0. the expected operational time of the machine is also 5. Note that the ratio P[ X = n + 1] n(0. Thus. Then X is negative binomial with “success” probability p = 0. if two people are hospitalized.4) (0.42 and 0.4) (0. ⎛ n − 1⎞ r ⎛ n − 1⎞ n−r 2 n−2 2 n−2 P[ X = n] = ⎜ ⎟ p (1 − p) = ⎜ ⎟ (0.5 Key: B 140.5 0.09 ⋅ 0. By symmetry. If the number of people hospitalized is 0 or 1. ⎝ r −1⎠ ⎝ 2 − 1⎠ We need to maximize P[X = n]. Thus.5 0. This is represented by the triangle with vertices at (0.09 ⋅ 0.4) = (n − 1)(0.42 + 0. Because the density is uniform over this region.
The expected bonus for a lowrisk driver is 0. The expected bonus payment from the insurer is 600 ⋅ 48 + 400 ⋅ 54 = 50.00 = 48 . there are 30 − 18 = 12 ways to select the third item.00 = 54 . The number of permutations of three qualifying items is (30)(20)(12). Alternatively. Because there are 10 squares in the row or column of the first selected item. 62 of 65 .8 ⋅12 (months) ⋅ 5. there are 30 ways to select the first item.141. there are 30 − 10 = 20 ways to select the second item. and the row of the middle selected item can then be chosen in any of four ways. The number of combinations is thus (30)(20)(12)/3! = 1200.9 ⋅12 (months) ⋅ 5.400 . the row of the leftmost selected item can then be chosen in any of five ways. The answer is thus (10)(6)(5)(4) = 1200. 142. The row of the rightmost selected item can be chosen in any of six ways. Key: C There are 10 (5 choose 3) ways to select the three columns in which the three items will appear. Key: B The expected bonus for a highrisk driver is 0. Because there are 18 squares in the rows or columns of the first and second selected items.
01.75. Key: C f ( y  x = 0. ⎧4 / 3 for 0 < y < 0. y ) ∫ f (0.75) = 11/144 = 0. less than 60 − x minutes are spent in the meeting itself. y ) .75) = f (0. Because C ∪ N ∪ A and H are mutually exclusive.5 < y < 1 which leads to Var (Y  X = 0. so if x minutes are spent in the waiting room. The number of TV watchers in the complement of C ∪ N ∪ A ∪ H is thus 100 − 63 = 37 .143. 146.75) = ⎨ .125 Thus. Key: E P(Pr ∪ Li) = P(Pr) + P(Li ∩ Pr') = 0. Key: E The total time is less than 60 minutes.5 f ( y  x = 0. ⎩2 / 3 for 0.75.75. Subtract from 1 to get the answer. 144. Key: B C = the set of TV watchers who watched CBS over the last year N = the set of TV watchers who watched NBC over the last year A = the set of TV watchers who watched ABC over the last year H = the set of TV watchers who watched HGTV over the last year The number of TV watchers in the set C ∪ N ∪ A is 34 + 15 + 10 − 7 − 6 − 5 + 4 = 45 .10 + 0. 63 of 65 . the number of TV watchers in the set C ∪ N ∪ A ∪ H is 45 + 18 = 63 . y)dy 0 1 = f (0.076. 145. 1.
9 . 000. Key: C 0.147. 000. Let N denote the number of hurricanes. 000 N 1. Key: A Let X denote the amount of a claim before application of the deductible. Note that independence is used to write the variance of a sum as the sum of the variances. 148.. 000(4) 1..992 .82 . which is Poisson distributed with mean and variance 4. 2 2 By the memoryless property of the exponential distribution. X N E Var X 1 . implies that 2 is the variance of X and E X 2 . this implies that the probability of a claim exceeding the deductible is 0. 000. 000E N 1.9 and thus E Y Var Y 1. 000 64 of 65 .000)2 = 1. 000 N E 1. 000. X N Var NE X 1 E NVar X 1 Var 1.9 2 0. Let X i denote the loss due to the ith hurricane. Then. Let be the mean of X. Let Y denote the amount of a claim payment after application of the deductible.000 and therefore variance (1..82 0.9 2 2 2 1. 000. which is exponentially distributed with mean 1.000. This problem can be solved using the conditional variance formula. the conditional distribution of the portion of a claim above the deductible given that the claim exceeds the deductible is an exponential distribution with mean . Let X denote the total loss due to the N hurricanes. Var X Var E X  N E Var X  N Var E X 1 . 0002 Var N 1.000. which because X is exponential.. 000(4) 8. Given that EY 0.
16 4 65 of 65 . This problem can be solved using the conditional variance formula.24 and variance 0.8 and therefore variance (0..3)2 0. Var X Var E X  N E Var X  N Var E X 1 .0576 N 2 0.3) = 0.8)2 = 0. X i has mean 0.0576 0. Let X denote the total unreimbursed loss due to the N accidents.0756.0576 0..64..0576E N 9 3 0. X N E Var X 1 .24 N E 0. X N Var NE X 1 E NVar X 1 Var 0. Thus.8(0.. which is binomial with parameters 1 3 9 1 3 3 and thus has mean 3 and variance 3 .0576 .3 times an exponentially distributed random variable with mean 0.24 Var N 0.64(0. Key: B Let N denote the number of accidents. 4 4 16 4 4 1 and 4 Let X i denote the unreimbursed loss due to the ith accident.149. which is 0. Note that independence is used to write the variance of a sum as the sum of the variances.
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