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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
08 or Pr [T ] = ( 0.6 Pr ( Ac ∩ H ) + 0.50 − 0.08 ) 2 = 0.48 4 of 65 .15 = 0.22 Pr ( C c ∩ T c ) = 0.14 Pr ( C ∩ T ) = 0.12 Therefore.15 Pr ( A ∩ H c ) = Pr ( A ) − Pr ( A ∩ H ) = 0.50 Pr ( Ac ∩ H ) = Pr ( H ) − Pr ( A ∩ H ) = 0.6 )( 0.4 )( 0. 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.35 ) + ( 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 ] + 0.15 = 0.65 − 0.8 )( 0.22 = 2 Pr [T ] − 0.88 = 1 − Pr ⎡C c ∩ T c ⎤ = Pr [C ∪ T ] = Pr [C ] + Pr [T ] − Pr [C ∩ T ] ⎣ ⎦ = Pr [T ] + 0. Pr ( A ∩ H ) = 0.8 Pr ( A ∩ H ) = ( 0.35 and the portion of policyholders that will renew at least one policy is given by 0.53 ( = 53% ) 100292 01B9 8.15 ) = 0.88 + 0.4 Pr ( A ∩ H c ) + 0. 0.7.5 ) + ( 0.14 + Pr [T ] − 0.
15 )( 0.075 P[D] = 0.15 .20 + ( 0.075 ) (1 – 0.075 Now the independence of C and D also implies the independence of CC and DC .33 .256 11.64 = 0.205 10. we see that P[CC ∩ DC] = P[CC] P[DC] = (1 – P[C]) (1 – P[D]) = (1 – 2 0.15/2 = 0.15 * 0. By the independence of C and D. nonsports).64 + 0.096 = 0.15 = P[C ∩ D] = P[C] P[D] = 2P[D] P[D] = 2(P[D])2 (P[D])2 = 0.70 − 0. By the Multiplicative Law. But P ( Ac ∩ Bc) = 1 – P (A ∪ B) And.075 and P[C] = 2P[D] = 2 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. 5 of 65 .075 ) = 0.744 = 0.20 – 0.096 It follows that P ( A ∪ B ) = 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: B Let M = event that customer insures more than one car S = event that customer insures a sports car Then applying DeMorgan’s Law. As a result. P ( A ∪ B ) = P ( A) + P ( B ) – P ( A ∩ B ). 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.9.70 ) = 0.744 and P (Ac ∩ Bc ) = 0. by the Additive Law. P ( A ∩ B ) = P ( B  A ) P (A) = 0. it therefore follows that 0.
20 0.12 ) = x + 0.12 ) − 0.64 1.00 From the table.08 0.05 0.14 0.04 3 3 2 x = 0.467 0.28 = 0.09 0.12 ) − 0.12 3 It follows that 1 1 x = ( x + 0. we can see that 20% of patients have a regular heartbeat and low blood pressure.15 Total 0.04 3 x = 0. Solution: E “Boxed” numbers in the table below were computed.12.10 ) − 3 ( 0.22 0. 13.85 Irregular heartbeat 0.02 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 ( 0.10 − 2 ( 0. we are told that P[ A ∩ B ∩ C] 1 x = P [ A ∩ B ∩ C  A ∩ B] = = P [ A ∩ B] x + 0. In addition.06 1 − 0. High BP Low BP Norm BP Total Regular heartbeat 0.56 0.60 6 of 65 .06 0. Solution: C The Venn diagram below summarizes the unconditional probabilities described in the problem.
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 = .14. 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. Solution: A 1 11 1 1 1 ⎛1⎞ pk − 2 = ⋅ ⋅ pk −3 = . Therefore..04 . 1= ∞ k 15. 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 . = ⎜ ⎟ 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 . x + z = .
75 ) Pr ( O )(1 − 0.25 = 1 − Pr ( E ) . it follows Pr ( E ) = 0.00356h) . P[−0. Solution: D Let X1 and X2 denote the measurement errors of the less and more accurate instruments. If N(μ.005h] – 1 = 2P ⎢ Z ≤ − 1 = 2P[Z ≤ 1.75 .84. 0.σ) denotes a normal random variable with mean μ and standard deviation σ.16.75 − Pr ( O )( 0.75 ) = 0.85 = Pr ( O ∪ E ) = Pr ( O ) + Pr ( E ) − Pr ( O ∩ E ) Since So ( Independence ) Pr ( E c ) = 0.005h] – P[Y ≤ −0.9192) – 1 = 0.00442 h 2 is N (0.4] – 1 = 2(0. 2 4 0. X2 is N(0.00562 h 2 + 0.005h] = P[Y ≤ 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. 0. Therefore.40 = Pr ( O ) + Pr ( E ) − Pr ( O ) Pr ( E ) 18. respectively. Solution: D Let N1 and N 2 denote the number of claims during weeks one and two. 0.0044h) and X1.005h] – P[Y ≥ 0. Solution: D Let O = Event of operating room charges E = Event of emergency room charges Then 0. X2 are X1 + X 2 0.005h ≤ Y ≤ 0.10 Pr ( O ) = 0.85 = Pr ( O ) + 0.005h ⎤ ⎡ = 2P[Y ≤ 0.005h] 0. ) = N(0. respectively. 0. Then since N1 and N 2 are independent. It follows that Y = 8 of 65 .0056h).00356h ⎥ ⎣ ⎦ independent.005h] = P[Y ≤ 0. then we are given X1 is N(0.
3) + ( 0.⎤ Pr [ Crit. Surv.⎤ ⎣ ⎦ = = ( 0.9 )( 0.] + Pr ⎡Surv.15) + ( 0.1584 ( 0.29 ( 0.3) = 0.005 )( 0.50 ) + ( 0.] ⎣ ⎦ 9 of 65 . 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.] ⎣ ⎦ ⎣ ⎦ ⎣ ⎦ Pr ⎡Surv.6 ) Pr ⎡Surv.04 )( 0. Seri.9 )( 0.0141 21.06 )( 0. Seri.40 ) + ( 0.49 ) + ( 0.1) + ( 0.10 ) ( 0.01)( 0.28)  20.⎤ Pr [Seri. Crit.03)( 0.06 )( 0. Solution: B Apply Baye’s Formula: Pr ⎡Seri.08) + ( 0.08) = 0.001)( 0.6 )( 0.⎤ Pr [Stab. Stab. 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 ] = ( 0.99 )( 0.001)( 0.02 )( 0.⎤ Pr [Seri.] + Pr ⎡Surv. Solution: B Apply Bayes’ Formula.19.10 ) = 0.
2 ) 0.3) + 2 Pr ⎡ D L ⎤ ( 0.45) + (0.08)(0.22 . 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)(0.16) = 0.16) + (0.04)(0.15)(0.4 Pr ⎡ D L ⎤ ( 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 ⎤ ( 0.5 ) + Pr ⎡ D L ⎤ ( 0.3 + 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 ⎣ 23.22.05)(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 ] = (0.25 + 0.42 1 0. upon applying Bayes’ Formula. 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.08) + (0.4 ⎣ ⎦ = = = 0. (0.31) 24.
18) + (0.99) 26. (0.25. P[ A 1997]P[1997] P[1997A] = P[ A 1997][ P[1997] + P[ A 1998]P[1998] + P[ A 1999]P[1999] = (0.02)(0.25 and P[S⏐C] = 2 P[S⏐CC] Now applying Bayes’ Theorem.45 .16) = 0.03)(0.25) 2 2 = = . Solution: D Use Baye’s Theorem with A = the event of an accident in one of the years 1997.005)(0.16) + (0.95)(0.95)(0. Solution: C Let: S = Event of a smoker C = Event of a circulation problem Then we are given that P[C] = 0.20)  11 of 65 .01) = = 0.657 .75 2 + 3 5 27. 2(0. 1998 or 1999. P[DY] = P[Y  D]P[ D] + P[Y ~ D]P[~ D] (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] (0.25) + 0. 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(0.05)(0.05)(0.01) + (0.
e− λ λ 2 e− λ λ 4 Let N be the number of claims filed.98 ) = 0. e–50λ = 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. 30.435 .10 )( 0.141)(1/ 5) = 0. Var[N] = λ = 2 .90 ) = 0.141 29 29 30 P ⎡ I1  C c ⎤ = ( 1 ) ( 0.7)80/50 = 0.334 ⎣ ⎦ Therefore.7) ∫ λe 0 − λt dt = −e− λt 80 0 = 1 – e–80λ = 1 – (0.096 ( 0.28. Now we are given that 0.7 or λ = − (1/50) ln(0. 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.02 )( 0.7) It follows that P[T ≤ 80] = =1–e (80/50) ln(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. Solution: C Let T denote the number of days that elapse before a highrisk driver is involved in an accident.141)(1/ 5) + ( 0.3 = P[T ≤ 50] = 50 ∫ λe 0 − λt dt = −e− λt 80 50 0 = 1 – e–50λ Therefore. P [ C  I1 ] = ( 0. Solution: D 12 of 65 .334 )( 4 / 5) 29.
02 ) ( 0.02 .3) + f ( 0.30 )( 0.30 ) ( 0.0488 4! 2 2 ( 0. We conclude that we should choose the payment amount C such that 2C = 120.98 ) k The following table summarizes the selection process for x: x Pr [ X = x ] Pr [ X ≤ x ] 0 1 2 ( 0.98 ) = 0. and Z Then f is a trinomial probability function.50 )( 0. 000 or C = 60.20 ) + 4 ( 0. 2.668 0. there is less than a 1% chance that more than two employees will achieve the high performance level.993 Consequently.20 ) + 4 3 3 = 0.272 2 18 190 ( 0. Y. Solution: D Let X denote the number of employees that achieve the high performance level.053 20 0. z) = probability function of X. Then X follows a binomial distribution with parameters n = 20 and p = 0.01 or. 2 ) = ( 0.99 ≤ Pr [ X ≤ x ] = ∑ k =0 ( 20 ) ( 0. 4 ) + f (1.31. Solution: D Let X = number of lowrisk drivers insured Y = number of moderaterisk drivers insured Z = number of highrisk drivers insured f(x.668 19 20 ( 0. 0. 0.20 ) + 4 ( 0.20 ) 2!2! 13 of 65 . so Pr [ z ≥ x + 2] = f ( 0. 000 32.940 0.3) + f ( 0.98) = 0. y.1.02 ) ( 0.02 )( 0. equivalently. x k 20 − k 0.98 ) = 0. Now we want to determine x such that Pr [ X > x ] ≤ 0.
First.005 ⎜ 400 − 200 − 20 x + x 2 ⎟ = 0.5∫ (10 + x ) dx = − (10 + x ) 0 0 ⎝ 10 16 ⎠ = 35. Solution: C Let the random variable T be the future lifetime of a 30yearold. 14 of 65 .5).005 ( 20 − t ) dt = 0.47 . Then. Therefore. or 12.33.5. 6): 6 −2 −1 6 ⎛1 1⎞ = ⎜ − ⎟ (12.005 ⎜ 20t − t 2 ⎟ 20 x x 2 ⎠ ⎝ 1 ⎞ 1 ⎞ ⎛ ⎛ = 0. calculate P(T < 5) by integrating f (x) = 12. 12.005 ⎜ 200 − 20 x + x 2 ⎟ 2 ⎠ 2 ⎠ ⎝ ⎝ where 0 < x < 20 . 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).5 (10 + x)−2 2 over the interval (0. 1 ⎞ ⎛ 0.5 ) = 0. Then. 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. 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 34.5 . calculate the probability over the interval (0. First. Solution: C −2 We know the density has the form C (10 + x ) for 0 < x < 40 (equals zero otherwise). 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 .
100 ⎪0 with probability 0. . Solution: D Let T denote printer lifetime.256 .56 Therefore.393) + 100(0. .239 Next.368 ⎩ Now E[Yi] = 200(0.000⏐V > 10. 000] 0. . 000] P[V > 10.393 ⎧ 200 ⎪ Yi = ⎨100 with probability 0.000] = P[Y > 0. .000] = P[100.36. = P[V > 10.6)5 = 0. Y100 where with probability 0.9)5 = 0.000 Y > 40.239) = 102. . 000] 0. Expected Refunds = ∑ E [Y ] = 100(102.4] = 0. Solution: B To determine k. .590 37.1 = (0. i =1 i 100 15 of 65 .078 .4 = (0.4 ∫ 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 ∩ V > 10. denote refunds for the 100 printers sold by independent and identically distributed random variables Y1.56) = 10.1 ∫ 5 (1 − y ) dy = − (1 − y ) 4 1 5 1 0.59 and P[V > 40.000 Y > 10.000] = P[Y > 0.1] = 0. It now follows that P[V > 40.132 .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 = 0.239 i = 1.000] = P[100.078 = = = 0. 000] P[V > 40. . 0 ≤ t ≤ ∞ Note that 1 1 P[T ≤ 1] = ∫ e −t / 2 dt = e − t / 2 1 = 1 – e–1/2 = 0. Then f(t) = ½ e–t/2.000] P[V > 40. .
we find C = ±0.95)18(0.95)19(0.5 ) = Pr ( 0 < X < 0. Then if 0 < X ≤ C ⎧0 Y =⎨ ⎩ X − C if C < X < 1 Now we are given that 0.5] −3 = Pr [ X < 2] − Pr [ X ≤ 1.5 ) − ( 2 ) = = −3 1 − F (1.5] Pr [ X ≥ 1. Solution: A Let F denote the distribution function of f.05)0 + 20(0. we conclude that C = 0. Then Using this result.358 + 0. since 0 < C < 1 .5 Finally.377 + 0.05)2 = 0.5 + C 0 = ( 0.5 + C ) = ∫ Therefore.5 ) ⎛3⎞ = 1− ⎜ ⎟ ⎝4⎠ = 0. Solution: E Let X be the number of hurricanes over the 20year period.5 + C ) 2 16 of 65 .5+ C 0 2 x dx = x 2 0.95)20(0.8 − 0.38.5] 3 −3 F ( 2 ) − F (1. The conditions of the problem give x is a binomial distribution with n = 20 and p = 0.5 ) (1. 40. we see F ( x ) = Pr [ X ≤ x ] = ∫ 3t −4 dt = −t −3 = 1 − x −3 x x 1 1 Pr [ X < 2 X ≥ 1.925 .05) + 190(0. It follows that P[X < 2] = (0.3 0.189 = 0.5] = Pr ⎡( X < 2 ) ∩ ( X ≥ 1. solving for C. Solution: B Denote the insurance payment by the random variable Y.64 = Pr (Y < 0.05 .5 ) (1.578 39.5 ) ⎤ ⎣ ⎦ Pr [ X ≥ 1.
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 ) ( 0.41. 000 = −1. Therefore.8 ) ⎤ ⎡1 − ( 10 ) ( 0.18 + 0. Therefore.469 (due to symmetry) (again due to symmetry) 42.30 ) Pr [ X B − X A ≥ 0] = 0. Y = number of group 2 participants that complete the study.2 )( 0.376] = 0.60 )( 0.8 ) ⎤ 10 9 10 ⎣ 9 ⎦⎣ ⎦ = 2 [ 0. 000 − 10. 000 and standard deviation σ = Var ( X B ) + Var ( X A ) = It follows that ( 2000 ) + ( 2000 ) 2 2 = 2000 2 17 of 65 .30 ) + ( 0. 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) = ( 0.40 )( 0. Solution: E Let X = number of group 1 participants that complete the study. 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. Now we are given that X and Y are independent.376][1 − 0.12 Pr [ X B − X A ≥ 0] Now X B − X A is a linear combination of independent normal random variables.2 )( 0.8 ) + ( 10 ) ( 0.8 ) − ( 10 ) ( 0.
18 + ( 0.223 { } 43.362 ) ⎦ ⎣ ⎦ ⎣ = 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.12 )( 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.638 = 0. = 1 − 0.2898 Alternatively the solution is ⎛ 2⎞ 4 ⎛ 2⎞ 3 5 ⎛ 2⎞ ⎛ 3⎞ 6 ⎛ 2⎞ ⎛ 3⎞ ⎜ ⎟ + ( 1 ) ⎜ ⎟ + ( 2 ) ⎜ ⎟ ⎜ ⎟ + ( 3 ) ⎜ ⎟ ⎜ ⎟ = 0.354] (Z is standard normal) Finally. and iii) calculating Pr [ k ≤ 3] 4 4 4 2 4 3 4 18 of 65 .362 C Pr ⎡ I A ∩ I B ⎤ ∪ ⎡( I A ∩ I B ) ∩ ( X A < X B ) ⎤ = 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 ⎦ = 0.1000 ⎤ ⎡ 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 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. 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 . 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 45.44. 0 < t < ∞ 3 Therefore. { 5 Thus. Solution: C If k is the number of days of hospitalization. then the insurance payment g(k) is 100k for k =1. E [ X ] = E ⎡ max ( T . Solution: D The density function of T is 1 f ( t ) = e−t / 3 . 2. 5. 3 g(k) = 300 + 50 (k − 3) for k = 4.
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 .4 ) .3. 2. 2.4 ) + 3000 ( 0.4 ) = 2694 49. Solution: E Let X and Y denote the year the device fails and the benefit amount. x = 1..6 ) ( 0. 48. Then ⎧100 X ⎪ f (X ) = ⎨ ⎪ ⎩300 + 25 ( X − 3) and if X = 1. 4 ⎪ y=⎨ if x > 4 ⎪0 ⎩ It follows that 2 3 E [Y ] = 4000 ( 0.4 ) + 1000 ( 0.6 ) ( 0..1772x .4 ) + 2000 ( 0.6 )( 0.6 ) ( 0. and ⎧1000 ( 5 − x ) if x = 1.3 if X = 4. We are given that T is exponentially distributed with parameter λ = 10 since 10 = E[T] = λ . Solution: D Let T be the time from purchase until failure of the equipment. respectively. = x(1 – ½ e –1/10 – ½ e–3/10) = 0.5 20 of 65 . Then the density function of X is given by x −1 f ( x ) = ( 0. Solution: D Define f ( X ) to be hospitalization payments made by the insurance policy.47.3. 2.
and let P be the amount paid to (3 / 2) n e −3/ 2 .000 e + E[10.33 3 3 50. .5(0.5(0.9343 .6) 2.000 (N – 1)] n! n=0 –3/2 = 10.000] = 10. .6) 2. ⎩10.000 (3/2) – 10.5 (0.5 1.5 ⎤ ⎡ 2.5 = 0. 000(n − 1) n =1 ∞ (3 / 2) n e −3/ 2 n! (3 / 2) n e −3/ 2 = 10. 000(n − 1) 51.6)1.5 =− + + 1.6) 2. .5 x 2. 000( N − 1) for N ≥ 1 Now observe that E[P] = = 10.6) 2.5 + 2(0.5 1.6) 2.5(0. 1.000 e–3/2 + 10.5(0.6) 2.6 2 ∞ 2 2. Solution: C Let N be the number of major snowstorms per year.6 ⎣ 2 ⎣ 0.5 1.6) 2.000 e–3/2 + ∞ ∑10.5 x 3.5 2(0.000 e–3/2 + E[10.5 x 2.5(0.5 ⎤ 2. Solution: C Let Y denote the manufacturer’s retained annual losses.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] = = 213.000N] – E[10. for 0. (2) 2.5(0. ∑10.5(0.5 x⎢ dx + ∫ 2 ⎢ dx = ∫ dx − ⎥ ⎥ ∫ x3. Then Pr[N = n] = n! for N = 0 ⎧0 P=⎨ .6 < x ≤ 2 ⎧x Then Y = ⎨ for x > 2 ⎩2 and E[Y] = =− ∞ 2 ⎡ 2.6 2 0.6) 2.5 ⎦ ⎦ 0.5(2)1.6) 2.231 .5 2.000 = 7.5 2 21 of 65 . n = 0. and the company under the policy.5 2.5 x1. 2.
N = 1.05) = 137 N 137 N Now because of the deductible of 2. 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. for 1 < y ≤ 10 ⎧y Let W denote claim payments..5 ( 0. Then W = ⎨ for y ≥ 10 ⎩10 10 ∞ 2 2 2 10 10 ∞ − 2 = 2 – 2/10 + 1/10 = 1. if N ≤ 2 . Solution: A Let us first determine K. if N > 2 5 Then..0314 ⎟+ 2⎢ 137 N ⎝ 137 ⎠ ⎣137 ( 4 ) ⎦ ⎣137 ( 5 ) ⎦ 53..9 .52.. 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 . the net annual premium P = E [ X ] where = ⎧0 X =⎨ ⎩N − 2 .
28 + ( 0.02 ⎩ and E [Y ] = ( 0.5 + ∫ e− x / 2 dx ⎤ ⎢ ⎥ 1 ⎣ ⎦ −7.408 ) (in thousands) = 0.5 ) = 0.020012 ) ⎡ ∫ xe − x / 2 dx − ∫ e − x / 2 dx ⎤ + 0. 55.328 It follows that the expected claim payment is 328 .020012 ) ( −30e −7.020012 ) ⎡ −30e −7.5 + 2e−0.94 )( 0 ) + ( 0.28 + ( 0.04 )( 0.28 + ( 0.5003) ∫ 15 1 ( x − 1) e− x / 2 dx + ( 0. 0 < x < ∞ . 4 u ⎣ 2 3⎦ ⎣ −2 −3 ⎦1 1 1 23 of 65 .28 + ( 0. 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 .28 + ( 0.020012 ) ⎡ −2 xe − x / 2  15 +2∫ e − x / 2 dx − ∫ e − x / 2 dx ⎤ 1 ⎢ ⎥ 1 1 ⎣ ⎦ 15 = 0.28 ⎢1 ⎥ 1 ⎣ ⎦ 15 15 = 0.5 + 2e −0.5 + 4e −0.04 ⎪14 with probability 0. To find k.28 + ( 0. du = dx.02 )(14 ) 15 15 = ( 0. x − 1) with probability 0.5 + 2e −0.020012 ) ⎡ −30e + 2e − 2e  1 ⎤ ⎣ ⎦ = 0.5 − x / 2 15 = 0.5 ) = 0. Then with probability 0.020012 ) ( −32e −7. note (1 + x) 4 = k 3 dx and substituting u = 1 + x.5 −0.54.020012 )( 2. 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 . Solution: B Let Y denote the claim payment made by the insurance company.5 − 2e−7.94 ⎧0 ⎪ Y = ⎨Max ( 0.
M′(t) = 20(1 – 2t)–11 M″(t) = 440(1 – 2t)–12 M″′(t) = 10. compute Mx′(t) = = 5 (1 − 2500t ) (1 − 2500t )5 (10.000 Var[X] = E[X2] – {E[X]}2 = 125. We are given that Mx(t) = 58.000 – (10. 000 Mx″(t) = = (1 − 2500t )6 (1 − 2500t )6 Then E[X] = Mx′ (0) = 10. 000 First. and XL represent annual losses for cities J. K. (1 − 2500t ) 4 (−4)(−2500) 10.000.000 E[X2] = Mx″ (0) = 125. 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 . and L. 57.000.000 Var[ X ] = 5. 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). Solution: B 1 for the claim size X in a certain class of accidents. Solution: E Let XJ. XK. respectively. Solution: C Let Y represent the payment made to the policyholder for a loss subject to a deductible D.000. 000)(−5)(−2500) 125.56. 000. for 0 ≤ X ≤ D ⎧0 That is Y = ⎨ ⎩ x − D for D < X ≤ 1 Then since E[X] = 500.560 24 of 65 .5 = (1 – 2t)–10 Therefore.000)2 = 25.560(1 – 2t)–13 E[X3] = M″′(0) = 10.5 (1 – 2t)–4.
5 x 2.5 2. Q1. Q3.06 60.4 . respectively. That is.01 p ) 200 It follows that x 70 − x 30 = ( 0. Solution: A The first quartile.5 2.2X and Var[Y] = Var[1.4 = 224. Then Y = 1.2X] = (1. ¾ = (200/Q1)2.5 (1 − 0. The interquartile range is the difference Q3 – Q1 . 61. the third quartile. Solution: E Let X and Y denote the annual cost of maintaining and repairing a car before and after the 20% tax.5 x ( 200 ) = 1− x 2. Solution: B The distribution function of X is given by 2.5 ( 200 ) F ( x) = ∫ 200 t 3.5 100 xp ( 200 ) 1 − 0.2)2(260) = 374 .5 2.4 = 348. x > 200 200 Therefore.5 − ( 200 ) dt = t 2.01 p = xp = 2. z ∞ Q1 f(x) dx .70 ) 200 25 = 93.5 or 25 of 65 . Similarly. is found by ¾ = Q1 = 200 (4/3)0. the p percentile x p of X is given by th ( 200 ) p = F ( xp ) = 1− 2.2)2 Var[X] = (1.2 .59.01 p ) xp = 25 200 xp 25 (1 − 0.30 ) 200 25 − ( 0.5 2. is given by Q3 = 200 (4)0.5 .
62. 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. Solution: C ⎧ X if 0 ≤ X ≤ 4 Note Y = ⎨ ⎩4 if 4 < X ≤ 5 Therefore.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.
00 – 21. 65. Solution: E Let X1.20) + 60(0.21. X2. X3.05) + 2500(0.10 + 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] Therefore.20) + 3600(0. 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 ⎤ = ∫ = 434.64.10) + 70(0.10) + 1600(0.10) + 80(0. 76. Solution: A Let X denote claim size. the proportion of claims within one standard deviation is 0. X4).79] = [33.10 = 0. 028 ( x − 250 ) dx = ( x − 250 ) 1500 = 250 ⎣ ⎦ 250 1500 4500 4500 Var [Y ] = E ⎡Y 2 ⎤ − { E [Y ]} = 434.15) + 30(0. 55.15) + 900(0.05 + 0. respectively.79 . Then if we define Y = max (X1. 16 2 2 It then follows that the density function g of Y is given by 27 of 65 .79.10) + 6400(0. X3. X2. Solution: B Let X and Y denote repair cost and insurance payment.30) = 60 + 90 + 80 + 500 + 360 + 490 + 1920 = 3500 Var[X] = E[X2] – (E[X])2 = 3500 – 3025 = 475 and Var[ X ] = 21.05) + 50(0.30)] = (3 + 3 + 2 + 10 + 6 + 7 + 24) = 55 E[X2] = 400(0.10) + 4900(0. Then E[X] = [20(0.45 . and X4 denote the four independent bids with common distribution function F. Now the range of claims within one standard deviation of the mean is given by [55.20 + 0.00 + 21. in the event the auto is damaged. 028 − ( 521) ⎣ ⎦ 2 2 Var [Y ] = 403 66.10) + 40(0.
6 + ( 2000 ) e −0. Finally.6 − 600e−0.6 ) e −0.6 )e −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 ( 0.6 ) e −0. The probability function for X is k e −0.6 ⎣ ⎦ k! 2 2 2 − ( 2000 ) e −0.6 = 2000 − 2000e −0.893 Var [Y ] = E ⎡Y 2 ⎤ − { E [Y ]} = 816.6 ∑ k =0 2 = ( 2000 ) 2 0.6 ∑ k =0 − e −0.6 − 1000 ( 0.6 ) e−0.6 ) e + 2000e ∑ k = 2 k! k ⎛ ⎞ ∞ 0.6 E [Y ] = 0 + 1000 ( 0.6 ∑ k = 2 ⎣ ⎦ 2 2 −0.6 − ⎡( 2000 ) − (1000 ) ⎤ ( 0.6 + 2000 ⎜ e −0.3 and k! k ∞ 0.6 −0.564 ⎣ ⎦ Var [Y ] = 699 28 of 65 . 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 0.6 = 1000 ( 0.6 − ( 0.6 .1.6 ) e −0.6 ∑ k =0 ∞ ( 0.6 ⎟ k! ⎝ ⎠ = 2000e = 573 E ⎡Y 2 ⎤ = (1000 ) ( 0.6 −0.6 ) k! k − 2000e −0.6k 2 2 2 − ( 2000 ) e −0.g ( y ) = G '( y ) = = 1 3 (1 + sinπ y ) (π cosπ y ) 4 4 cosπ y (1 + sinπ y ) 5/ 2 3 π .6 − ⎡( 2000 ) − (1000 ) ⎤ ( 0.6k k! ∞ = ( 2000 ) e −0.6 ⎣ ⎦ ∞ 2 2 = 816.6 ) e −0.6 ) p ( x) = k = 0.6 0. 2.
Solution: C Note that X has an exponential distribution. Therefore.29 .004e −0.95 = = where F(x) is the distribution function of X . c = 0. Pr (T ≥ 5 ) = 1 − F ( 5 ) = e −5 θ = e 5ln ( 2 ) 4 = 2−5 4 = 0.50 for x ≥ 250 ⎩250 = ∫ 0. Then Y = ⎨ and we want to find m such that 0.004 x dx = −e −0.004 x 0 m m 0 = 1 – e–0.004m = 0. 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.05 e–1/3) = 999 29 of 65 . 0. t > 0 Since we are told that T has a median of four hours. Consequently. Now let Y denote the for x < 250 ⎧x claim benefits paid. 1 − e − p95 / 300 − (1 − e −100 / 300 ) e −1/ 3 − e − p95 / 300 = = 1 − e1/ 3e − p95 / 300 Therefore.42 70. We are given that X follows an exponential distribution with mean 300. 69.68.05 e –1/3 p95 = −300 ln(0. P[ X > 100] 1 − F (100) Now F(x) = 1 – e–x/300 .95 = 1 − (1 − e −100 / 300 ) e −1/ 3 e − p95 / 300 = 0. Solution: D The distribution function of an exponential random variable T with parameter θ is given by F ( t ) = 1 − e − t θ . Solution: E Let X denote actual losses incurred. and we are asked to find the 95th percentile of all claims that exceed 100 . we want to find p95 such that Pr[100 < x < p95 ] F ( p95 ) − F (100) 0.004 .5 ⇒ m = 250 ln 2 = 173.004m This condition implies e–0.
000 ) 1 dr = r = ∫0. Solution: E ⎡ F ( y ) = Pr [Y ≤ y ] = Pr ⎡10 X 0.04 ⎥ ⎣ ⎝ 10.71. 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. 000 ) − 1 0. 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 .04 0. 000e R ≤ v ⎤ = Pr ⎡ R ≤ ln ( v ) − ln (10.04 0. 000e R Therefore.04 ⎡ ⎛ v ⎞ ⎤ = 25 ⎢ ln ⎜ ⎟ − 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 . the distribution function of V is given by F ( v ) = Pr [V ≤ v ] = Pr ⎡10. Solution: E We are given that R is uniform on the interval ( 0.04. 000 ) ⎤ ⎣ ⎦ ⎣ ⎦ 1 ln ( v )−ln (10.04 73.08 ) and V = 10. 0.8 ≤ y ⎤ = Pr ⎢ X ≤ Y ⎣ ⎦ 10 ⎣ 1 ⎛ Y ⎞ 4 − Y 10 5 4 Therefore. f ( y ) = F ′ ( y ) = ⎜ ⎟ e ( ) 8 ⎝ 10 ⎠ 1 ( ) 10 8 − (Y ) ⎤ = 1 − e 10 ⎥ ⎦ 10 8 30 of 65 .000 ) = 25ln ( v ) − 25ln (10. 000 ⎠ ⎦ ln ( v ) − ln (10.
let X1. and X3 denote the three claims made that have this distribution. x > 1 1 t t x Next. 2 2 3 .74. 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. 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. Solution: E First note R = 10/T . Solution: A First. X2. respectively. 4 ⎝ r ⎠ 2r 75. y>1 31 of 65 . Then 10 ⎤ ⎡10 ⎤ ⎡ ⎛ 10 ⎞ FR(r) = P[R ≤ r] = P ⎢ ≤ r ⎥ = P ⎢T ≥ ⎥ = 1 − FT ⎜ ⎟ . 76. Then if Y denotes the largest of these three claims. We are given that the pdf of X is f . 12] . dt 4 −1 ⎛ −10 ⎞ 5 Therefore fR(r) = ⎜ 2 ⎟= 2 . Solution: A Let X and Y be the monthly profits of Company I and Company II. 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 . 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 ⎞ . 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) . observe that the distribution function of X is given by x 3 1 x 1 F ( x ) = ∫ 4 dt = − 3  1 = 1 − 3 .
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. = 1− Note 2 2 ∫∫ 1 1 1 ( x + y )dxdy = 0.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. This evaluation is more easily performed by integrating over the unshaded region and subtracting from 1.025 (in thousands) ⎣2 5 8⎦ 77. Solution: B That the device fails within the first hour means the joint density function must be integrated over the shaded region shown below. Solution: D Prob. 32 of 65 .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.
548 . and so p = nμ + 1. Therefore.282 )(11.41 54 79. 250 .125 + (1. 80. From the tables.282.282 σ n = 6. 1/ 2 1 1 1/ 2 ⎡⎛ 1⎞ ⎛ 1 ⎞⎤ Pr ⎢⎜ S ≤ ⎟ ∪ ⎜ T ≤ ⎟ ⎥ = ∫ ∫ f ( s. Solution: E The domain of s and t is pictured below. t ) dsdt + ∫ ∫ f ( s. σ n σ n = 250 2025 = 11.328. the total contributions are approximately normally distributed with mean nμ = ( 2025 )( 3125 ) = 6.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. 250 ) = 6.328. t ) dsdt 0 0 2⎠ ⎝ 2 ⎠ ⎦ 0 1/ 2 ⎣⎝ (where the first integral covers A and the second integral covers B). Letting p be the 90th percentile for total contributions. the 90th percentile for a standard normal 33 of 65 .342.125 and standard deviation random variable is 1. 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. p − nμ = 1. Solution: C By the central limit theorem.282 .
000 − 19.9772 ≤ Pr [ S > 40] = Pr ⎢ > ⎥ n ⎦ ⎣ n This implies that n should satisfy the following inequality: 34 of 65 . . 25) follows a normal distribution with mean 19. we may conclude that S has an approximate normal distribution with E[S] = Var[S] = (2)(1250) = 2500 . 400 20. Now we are interested in the random variable S = X1 + . As a result X also follows a normal distribution with mean 1 19. .7257 = P⎢ ⎥ = P ⎢ 1000 1000 ⎣ 1000 ⎦ ⎣ ⎦ = 0. . . 83. . Assuming that the random variables are independent. . . X25 denote the 25 collision claims. 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 .8186 . + X1250 .000] 25 ⎡ X − 19. X1250 be the number of claims filed by each of the 1250 policyholders.6) = 1 – 0. . 400 ⎤ > > 0.81. 82. +X25) . . It follows that E[Xi] = Var[Xi] = 2 .6 ⎥ = 1 − Φ(0. . . 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. Solution: B Let X1. .400 and standard deviation (5000) = 1000 . . Since these random variables are independent and normally distributed with mean 3 and variance 1. We are given that each Xi follows a Poisson distribution with mean 2 . We conclude that P[ X > 20. Solution: C 1 Let X1.…. .8413 – 1 = 0. .400 and standard deviation 5000 . 400 ⎤ ⎡ X − 19. and let X = (X1 + .9773 + 0. Xn denote the life spans of the n light bulbs purchased. We are 25 given that each Xi (i = 1. . Solution: B Let X1.2743 . 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.
Therefore. Solution: B Observe that E [ X + Y ] = E [ X ] + E [Y ] = 50 + 20 = 70 Var [ X + Y ] = Var [ X ] + Var [Y ] + 2 Cov [ X . 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. 35 of 65 . 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 ) 84.8413 where Z is a standard normal random variable.40 − 3n n To find such an n. Y ] = 50 + 30 + 20 = 100 for a randomly selected person.
5 − 70 ⎤ Pr [ S ≤ 90. then Total Premium Collected = 100(1.28] = 0.100) = 110. the Central Limit Theorem then implies that S = X 1 + .1) + ( 2 ) ( 0..841 ≈ 0.. if we denote total claims by S.4 )( 0. it follows from what we are given that E[X] = 1000.1 ⎪ ⎩2 with probability ( 0. Var[X] = 1. 000 − 100..000.159 ..5] = Pr ⎢ ≤ ⎥ 9 ⎣ 9 ⎦ = Pr [ Z ≤ 2. Solution: E Let X 1 ..3) = 1..100 .. X 100 are assumed by the consulting actuary to be independent. 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)(1.3 for i = 1. Since x is exponential with parameter 1000..25 ) = 0.4 = 0.99 36 of 65 .000] = 1 – P ⎢ Z ≤ ⎥ = 1 – P[Z ≤ 1] = 1 10.000) . + E [ X 100 ] = 100 ( 0.81) = 81 Consequently. 86. Therefore.3 .000. Now under the assumptions given.6 ) + (1) ( 0.000] = 1 – P[S ≤ 110...75 ) = 0. Solution: B Denote the policy premium by P . 000 ⎤ ⎡ P[S ≥ 110. 2 2 2 2 2 E ⎡ X i ⎤ = ( 0 ) ( 0.4 )( 0.1) + ( 2 )( 0. ⎧0 with probability 1 − 0.000 and standard deviation = 10. It follows from the Central Limit Theorem that S is approximately normally distributed with mean 100.3 − ( 0.7 ) = 0. 000 ⎣ ⎦ – 0. Var[ X ] = 1000 and P = 100 + E[X] = 1.81 ⎣ ⎦ Since X 1 . Therefore.000 . and ⎣ ⎦ 2 2 Var [ X i ] = E ⎡ X i ⎤ − { E [ X i ]} = 1.7 ..3) = 0.000 Moreover.6 ) + (1)( 0.....7 ) = 70 and variance Var [ S ] = Var [ X 1 ] + . E [ X i ] = ( 0 )( 0.. Now if 100 policies are sold. + X 100 is approximately normally distributed with mean E [ S ] = E [ X 1 ] + . X 100 denote the number of pensions that will be provided to each new recruit. + Var [ X 100 ] = 100 ( 0.. ⎡ S − 70 90.6 ⎪ X i = ⎨1 with probability ( 0.000.. 110.100 .85.
−2.443 = distribution that is approximately normal with mean 0 and standard deviation 48 0. y > 0 Therefore.2] = 2P[Z ≤ 1.5 −2. Solution: C Let X denote the waiting time for a first claim from a good driver.2] = P[Z ≤ 1.5. the difference between the means of the true and rounded ages.5 < x < 2. That is.5)3 =2. and let Y denote the waiting time for a first claim from a bad driver.2083 .5) .5 = 2(2.2] = P[Z ≤ 1. It follows that μ x = E[X] = 0 σx2 = Var[X] = E[X2] = x2 x3 dx = ∫ 5 15 −2.2] – P[Z ≤ – 4⎦ 0.083 15 σx =1. We are given X is uniformly distributed on (−2. has a 1.77 .5 .5 2. Solution: D Let X denote the difference between true and reported age.2083 ⎦ 1. 1⎤ 0. 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 .8849) – 1 = 0.25 P ⎢ − ≤ X 48 ≤ ⎥ = P ⎢ ≤Z≤ = P[−1.2 ≤ Z ≤ 1. x > 0 and G ( y ) = 1 − e− y / 3 .25 ⎤ ⎡ 1 ⎡ −0.2083 ⎥ ⎣ 4 ⎣ 0.443 Now X 48 .2] – 1 + P[Z ≤ 1. 88. Therefore.2] – 1 = 2(0. The problem statement implies that the respective distribution functions for X and Y are F ( x ) = 1 − e− x / 6 .2. X has pdf f(x) = 1/5.87.5 2.
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 . 0 < t1 < ∞ . Solution: D We want to find P[X + Y > 1] . Solution: B ⎧ 6 (50 − x − y ) ⎪ We are given that f ( x.89. Then the joint pdf of T1 and T2 is ⎛1 ⎞⎛ 1 ⎞ 1 f (t1 . In order to determine integration limits. Solution: C Let T1 be the time until the next Basic Policy claim. 90. 91. 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. y ) = ⎨125. 000 20 30 50 − x 20 ∫ (50 − x − y ) dy dx . 000 ⎪0 ⎩ for 0 < x < 50 − y < 50 otherwise and we want to determine P[X > 20 ∩ Y > 20] . 20) 50 x 6 We conclude that P[X > 20 ∩ Y > 20] = ∫ 125. consider the following diagram: y 50 x>20 y>20 (20. t2 ) = ⎜ e− t1 / 2 ⎟ ⎜ e− t2 / 3 ⎟ = e− t1 / 2 e− t2 / 3 . 30) (30. To this end. and let T2 be the time until the next Deluxe policy claim.4 .
19 ⎝ 200 ⎠ 39 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: Pr ⎡ X − Y < 20 ⎤ = ⎣ ⎦ Shaded Region Area ( 2200 − 2000 ) 2 = 2002 − 2 ⋅ 1 2 (180 ) 2 2002 1802 2 = 1 − ( 0.9 ) = 0.19 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.
295 100 100 100 94. Solution: C Define X and Y to be loss amounts covered by the policies having deductibles of 1 and 2. t2 ) denote the joint density function of T1 and T2 . since X and Y are uniform random variables. respectively. 0 < y < 10 100 We could integrate f over the shaded region in order to determine the desired probability. That is. Pr ( Total Benefit Paid Does not Exceed 5) = Pr ( 0 < X < 6. However. 2 < Y < 7 ) + Pr (1 < X < 6. 0 < Y < 2 ) + Pr ( 0 < X < 1.93. 0 < x < 10 . y ) = .5 + + = 0. 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 . it is simpler to determine the portion of the 10 x 10 square that is shaded in the graph above. 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. Solution: C Let f ( t1 .
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. 41 of 65 . 0 < t2 < 6 . 0 < t1 < 6 .65 ) = 985 . f ( t1 .98 ) = 0.02 ) = ( 0. the probability that 21 21 all 21 passengers will show up is (1 − 0.65 . Solution: E t X +Y + t Y − X t −t X t +t Y M ( t1 . However. he may be required to refund 100 to one passenger if all 21 ticket holders show up. Solution: E Observe that the bus driver collect 21x50 = 1050 for the 21 tickets he sells.7 3 ⎦⎭ ⎩ 17 34 ⎣ 95. Since passengers show up or do not show up independently of one another.⎧1 . t1 + t2 < 10 ⎪ Consequently. the tour operator’s expected revenue is 1050 − (100 )( 0. Therefore. 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.
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 . Note that Y = 1 if and only if X1 = X2 = X3 = 1 . Solution: A Let g(y) be the probability function for Y = X1X2X3 . 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. t2) = 2/L2.97. L t2 2 2 2 2 2 Therefore. Y = 0 . ⎧ 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 . Solution: C We are given f(t1. 0 ≤ t1 ≤ t2 ≤ L . L) t1 98. Otherwise.
and Var ( X + Y ) = Var ( X ) + Var (Y ) + 2 Cov ( X .1) Y ⎤ + 2 Cov ( X . Cov ( aX . bY ) = ab Cov ( X . 000 = Var ( X + Y ) = 5000 + 10. and so Cov ( X .1) Cov ( X .99. 102. Y ) . Solution: C We use the relationships Var ( aX + b ) = a 2 Var ( X ) . Y ) .100 + 2200 = 19. Y ) . 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. Var [ X ] = Var [Y ] = 102 = 100 Then assuming that X and Y are independent. We want to find Var ⎡( X + 100 ) + 1. Now the variance of an exponential random variable with mean β is β 2 . Therefore.1Y ) + 100 ⎤ ⎣ ⎦ ⎣ ⎦ = Var [ X + 1. 2 100. 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 . Solution: E Let X and Y denote the times that the two backup generators can operate.58 . First we observe 17. Y ) = 1000. Y ) = 5000 + 12.1Y ⎤ = Var ⎡( X + 1.1) Var Y + 2 (1.1Y ) ⎣ ⎦ = Var X + (1. we see Var [ X+Y ] = Var [ X ] + Var [ Y ] = 100 + 100 = 200 43 of 65 . 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 . 000 + 2 Cov ( X . 101.300.1.1Y ] = Var X + Var ⎡(1.
103. It follows that X and Y are independent. addition. respectively. Y] = 0 . let Y = Max ( X 1 . Therefore. Then f(x. f(x.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. and X 3 denote annual loss due to storm. X 2 . X 2 . 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. Then Solution: E Let X 1 . fire.y) = g(x)h(x) In other words.4 −5 4 ∞ * = 0.5 = 1 − (1 − e −3 )(1 − e −2 )(1 − e ) ) (1 − e ) −3 2. 44 of 65 . and theft. 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 . Y ] = E [ XY ] − E [ X ] E [Y ] = − ⎜ ⎟ ⎜ ⎟ = − = 0 3 ⎝ 3 ⎠⎝ 2 ⎠ 3 3 (Alternative Solution) Define g(x) = kx and h(y) = 1 .y) can be written as the product of a function of x alone and a function of y alone. X 3 ) . Cov[X.
Y) = E[XY] – E[X]E[Y] = 24 − (3)(6) = 24 – 18 = 6 . Solution: C The joint pdf of X and Y is f(x.105. Y ) = E ( XY ) − E ( X ) E (Y ) = 28 ⎛ 56 ⎞⎛ 4 ⎞ − ⎜ ⎟⎜ ⎟ = 0. Therefore. Solution: A The calculation requires integrating over the indicated region. 0 < y < x.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 . 45 of 65 . 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.04 27 ⎝ 45 ⎠⎝ 5 ⎠ 106. 0 < x < 12 .
2 ( 51.8 Cov ( X .2Y E[X ] = 5 E [Y ] = 7 E ⎡ X 2 ⎤ = 27. X + 1.1.2Y ) = Var X + Cov ( X . X + 1.4 ) − (12 )(13. C2 ) = Cov ( X + Y . Solution: A Cov ( C1 .2 ( 2.2VarY Var X = E ( X 2 ) − ( E ( X ) ) = 27.6 2 2 Cov ( C1 .2 E [ XY ] − 71.2Y ) = E ⎡( X + Y )( X + 1. observe 46 of 65 .4 − 52 = 2.4 − 7 2 = 2.4 2 Var ( X + Y ) = Var X + Var Y + 2 Cov ( X .2 E [ XY ] + 1.1.2Y ) ⎤ − E [ X + Y ]i E [ X + 1.72 Therefore.2 E [ XY ] + 1. To this end. Y ) + 1.2VarY = Var X + 2.2 E [Y ]) ⎣ ⎦ = E ⎡ X 2 ⎤ + 2. Y ) = 107. Alternate solution: We are given the following information: C1 = X + Y C2 = X + 1.4 ⎣ ⎦ E ⎡Y 2 ⎤ = 51. we need to calculate E [ XY ] first. Y ) 1 ( Var ( X + Y ) − Var X − Var Y ) = 1 ( 8 − 2.2Y ) = Cov ( X .4 ) = 8.2 (1.4 2 Var Y = E (Y 2 ) − ( E (Y ) ) = 51. Y ) + 1.2Y ] ⎣ ⎦ = E ⎡ X 2 + 2.4 − 2.2Y 2 ⎤ − ( E [ X ] + E [Y ]) ( E [ X ] + 1. C2 ) = 2.6 ) + 1.4 + 2. X ) + Cov ( X .2Y ) + Cov ( Y.2Cov ( X .107. Y ) + 1.2 XY + 1.2 Cov ( X .4 + 2.4 ) = 2. C2 ) = Cov ( X + Y .2 ) 7 ) ⎣ ⎦ ⎣ ⎦ = 27.4) = 1. X ) + Cov (Y .2 E ⎡Y 2 ⎤ − ( 5 + 7 ) ( 5 + (1.4 ⎣ ⎦ Var [ X + Y ] = 8 Now we want to calculate Cov ( C1 .
4 + 2 E [ XY ] + 51.8 E [ XY ] = ( 8 + 65. Cov ( C1.2 Finally.4 − 144 = 2 E [ XY ] − 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 . Solution: A The joint density of T1 and T2 is given by f ( t1 .6 ) − 71.72 = 8.C2 ) = 2. 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 . x > 0 ⎢ dx ⎣ ⎦ − 1 x − 1 x 47 of 65 .2 ) 2 = 36. t2 > 0 Therefore. t1 > 0 . t2 ) = e − t1 e− t2 .6 2 2 108.2 ( 36.2 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.
0< y< . and F(x) be the distribution function of X. 0 < u < ∞ . Pr ⎡Y < X X = 1 3⎤ = ∫ ⎣ ⎦ 0 2 4 13 = 0 1 4 48 of 65 . v) be the joint density function of U and V. Solution: B Let u be annual claims. Solution: C Note that the conditional density function 1 ⎞ f (1 3. y ) = y . 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. ⎛1 ⎞ 1 g ( u. 0 < y < It follows that f ⎜ y x = ⎟ = 3 ⎠ 16 2 3 ⎝ 139 9 y dy = y 2 Consequently. f(x) be the density function of X.109. v ) = ( e−u ) ⎜ e− v / 2 ⎟ = e−u e− v / 2 . f ( x ) = F ' ( x ) = 2 ( 2 x + 1) ∞ 110. 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. Then since U and V are independent. g(u. 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 . v be annual premiums. y ) 2 ⎛ f ⎜y x= ⎟= .
05 1 1 5 ⎡ 20 = + = = 0. y ) Pr ⎡1 < Y < 3 X = 2 ⎤ = ∫ dy ⎣ ⎦ 1 f x ( 2) f ( 2.01 = 0.97 Pr ⎡ H ∩ W c ⎤ ⎣ ⎦ Pr [ H ] = 0. 0 < y < 0.0103 0.111.10] = ∫ [10 + 100 y ] dy = ⎢ y + 3 3 3 12 12 ⎣3 ⎦0 0 so f(yx) = 113. Now fx(x) = ∫ (2 x + 2 y )dy = ⎡ 2 xy + y 2 ⎤ ⎣ ⎦ 0 x x 0 = 2x2 + x2 = 3x2.y) = 2(x+y). 0 < y < x 3x 2 3⎝ x x ⎠ f x ( x) 2⎡ 1 y ⎤ 2 + = [10 + 100 y ] . 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.10 f(yx = 0. 0 < x < 1 f ( x.4167 .9897 Pr [ H ] 0. Solution: D We are given that the joint pdf of X and Y is f(x.97 ⎡ Pr ⎣W c  H ⎤ = ⎦ 49 of 65 .01 = 0.1 0.10) = ⎢ 3 ⎣ 0.96 = = 0. Solution: E 3 f ( 2. y ⎥ P[Y < 0.97 ⎣ ⎦ and Pr [W  H ] = Pr [W ∩ H ] 0. 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. Pr ⎡1 < Y < 3 X = 2 ⎤ = ⎣ ⎦ ∫ 3 1 1 −3 y dy 3 1 8 2 = − y −2 = 1 − = 1 1 9 9 4 112.05X = 0. 0 < y < x < 1 .05 2 100 2 ⎤ 0.96 + 0.01 ⎥ 3 ⎦ 0. y ) 2( x + y ) 2 ⎛ 1 y ⎞ = = ⎜ + 2 ⎟.
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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120.17 . 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 ⎟ ⎥ = 5.778 64 ⎣⎝ ⎠ ⎝ ⎠⎦ 53 of 65 . Solution: A We are given that X denotes loss. x < t < 2 x. t t = 2x 4 2 4 3 2 1 1 2 t=x x 121. otherwise. t ) = ⎨ 8 x 8 ⎪0. 0 ≤ x ≤ 2 Then the joint pdf of X and T is f ( x. ⎩ 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. denote the time required to process a claim by T. ⎧3 2 1 3 ⎪ x ⋅ = x . In addition.
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 . 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. respectively. ∫ 2 y e–2y dy = 1/2 0 ∞ and ∫ 3 y e–3y dy = 1/3 . We conclude that E(Y) = (6/2) (1/2) – (6/3) (1/3) = 3/2 – 2/3 = 0 ∞ 9/6 − 4/6 = 5/6 = 0.122. 123. 0 < y < ∞ ∞ 0 ∫e 0 y −x dx Therefore.83 . 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. In other words.
the conditional variance of Y is equal to the unconditional variance of Y.y) can be written as f ( x) f ( y ) = e − x 2e −2 y and the support of f(x. X and Y are independent. Thus. Because of the memoryless property of the exponential distribution. 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 . y ) f Y ( y) = 2 1 = for y < x < 1 2 − 2y 1− y 55 of 65 . 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. y ) = f ( y  x) f X ( x) = 2 on that support. Because the mean of Y is 0.5 and the variance of an exponential distribution is always equal to the square of its mean. Solution: E The support of (X. f X . 125. the conditional density of Y is the same as the unconditional density of Y+3.124.Y ( x.y) is a cross product.Y ( x. Solution: A Because f(x. Because a location shift does not affect the variance. the requested variance is 0.Y) is 0 < y < x < 1.25. 1− y f X . the condition on X can be ignored and it suffices to just consider f ( y ) = 2e −2 y .
⎡ ⎤ S − (200)(5625) P[1.267 . 15000).781741613 < < 1. So.609. Thus p0 = .25 * 0 + 0. so the variance of one claim is 12 Var ( X ) = E[ X 2 ] − E[ X ]2 = 24.000.000] = P ⎢− 1. 15000 2 ) = 56. 56 of 65 . Solution: C Using the notation of the problem.000 . Thus p 0 + ( p 0 − c ) + ( p 0 − 2c ) + . we know that p0 + p1 = p0 + p1 + p2 + p3 + p4 + p5 = 1 . Then pn = p0 − nc for 1 ≤ n ≤ 5 .8575(10. ⇒ −6 p0 + 15c = −1 . Let pn − pn +1 = c for all n ≤ 4 .25 and otherwise the payout is U(0.75 * (7500 2 + Applying the CLT. 120 120 120 6 p0 − 3c = ⎧6 p0 − 15c = 1 ⎪ ⎨ 2 ⎪2 p0 − c = 5 ⎩  127. we can apply the central limit theorem and assume the total payout S is normal.069044968⎥ (200)(24.609.250. So c = and 2 p0 = + = 60 5 60 60 120 1 12c = 5 17 15 32 We want p4 + p5 = ( p0 − 4c ) + ( p0 − 5c ) = + = = 0.25 * 0 + 0..375) ⎢ ⎥ ⎣ ⎦ which interpolates to 0. 2 and 5 2 Also p0 + p1 = p0 + ( p0 − c ) = 2 p0 − c = . E[ X ] = 0.375 . Solving simultaneously 5 6 5 1 2 1 25 25 .200.126.8201 from the provided table.9626)=0. + ( p 0 − 5c ) = 6 p 0 − 15c = 1.000 < S < 1. For one loss there is no payout with probability 0.. Solution: D Because the number of payouts (including payouts of zero when the loss is below the deductible) is large.75 * 7500 = 5625 . E[ X 2 ] = 0.
and none have both homeowners and renters insurance. Therefore. We observe that a reimbursement of 115 corresponds to health care costs of 150 (100% x (120 – 20) + 50% x (150 – 120)). G (115) = F (130) = 1 − e − 130 100 = 0. Key: B The reimbursement is positive if health care costs are greater than 20. 129.5 57 of 65 . 130. and because of the memoryless property of the exponential distribution. Because H = 2R. which implies that 10% have both renters and auto insurance.5) ] = 100E[e ( X ln 0.9 1 − 2 ln 0. Key: B Let H be the percentage of clients with homeowners insurance and R be the percentage of clients with renters insurance. but not auto insurance.5) = 100 1 = 41.727 .5) [ X ] = 100E[(0. Key: C E 100(0.128. Because 36% of clients do not have auto insurance and none have both homeowners and renters insurance.5 ) X ] = 100M X (ln 0. (R – 8)% have both renters and auto insurance. the conditional distribution of health care costs greater than 20 is the same as the unconditional distribution of health care costs. (H – 11)% have both homeowners and auto insurance. we calculate that 8% (36% – 17% – 11%) must have renters insurance. which is 130 greater than the deductible of 20. so (H + R – 19)% must equal 35%. R must be 18%.
96 58 of 65 .140 1000 = −e 1−1.102 . ⎛ 80 ⎞ ⎜ ⎟ ⎜5⎟ ⎝ ⎠ 133. The p (n1 . 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.150 1000 e 1−1. 132. n2 ) = ∞ 3⎛1⎞ ⎜ ⎟ 4⎝4⎠ n1 −1 ∞ n2 =1 ∑ e −n1 1 − e −n1 ( ) n2 −1 = 3⎛1⎞ ⎜ ⎟ 4⎝4⎠ n1 −1 . ⎛10 ⎞⎛ 70 ⎞ ⎜ ⎟⎜ ⎟ ⎜ 2 ⎟⎜ 3 ⎟ The probability that exactly two of a random sample of five are defective is ⎝ ⎠⎝ ⎠ = 0. sum the joint probability function over all possible values of N 2 obtaining First.0696) = 347.0696 Expected Benefit = 5000 Pr(man dies before age 50) = (5000) (0. find the conditional probability function of N 2 given N 1 = n1 : p 21 (n 2  n1 ) = p1 (n1 ) = since n2 =1 ∑ p(n1 .150 ) 1000 = 0. To find the latter.131. Solution: C The number of defective modems is 20% x 30 + 8% x 50 = 10. 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. p1 (n1 ) where p1 (n1 ) is the marginal probability function of N 1 . n2 ) . which is the probability function of a geometric random variable with parameter p = e − n1 .140 −1. Solution: E p(n1 . n 2 ) = e − n1 1 − e − n1 p1 (n1 ) conditional probability function is p 21 (n 2  n1 ) = ( ) n2 −1 . The mean of this distribution is 1 / p = 1 / e − n1 = e n1 .140 1000 = 1− e (1.
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. t = 0. The probability we seek is 3t + t = 0. 59 of 65 . Thus.80.2 since t + 3t + t = 1.134. Solutions: C Letting t denote the relative frequency with which twinsized mattresses are sold.
E [X  X ≥ 3] = 1 + 2 = 6 + 2 = 8 .75 = 2.30e + 0.2(1) + 0. the moment generating function of X + Y equals K2(t). This is the moment generating function of a discrete random variable that assumes the values 1. and 0.50 + 0. 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%). 0. Key: E Because X and Y are independent and identically distributed.30e .135.70. Thus. 60 of 65 .6 p 137.30. so E [X Y = 2] = 0. Y = 2 implies the first roll is not a 6 and the 6 second roll is a 6. Key: E Var (N) = E [ Var ( N  λ )] + Var [ E ( N  λ )] = E (λ) + Var (λ) = 1.25 136. The value we seek is thus 0. K(t) = t t 0. Key: D X follows a geometric distribution with p = 1 .40 + 0.40.30. 0.8(8) = 6. where K(t) is the moment generating function common to X and Y. and 1 with respective probabilities 0.
0). the probability that the total loss will be less than 1 is 0.09 ⋅ 0.42 and 0. Note that the ratio P[ X = n + 1] n(0. ⎝ r −1⎠ ⎝ 2 − 1⎠ We need to maximize P[X = n].6) . P[X = n] is maximized at n = 3.5 Key: B 140. given that the total loss due to hospitalizations from the accident is less than 1 is 139.49 + 0. if two people are hospitalized. Thus. ⎛ n − 1⎞ r ⎛ n − 1⎞ n−r 2 n−2 2 n−2 P[ X = n] = ⎜ ⎟ p (1 − p) = ⎜ ⎟ (0. If the number of people hospitalized is 0 or 1. Key: B The unconditional probabilities for the number of people in the car who are hospitalized are 0.49 0. then the total loss will be less than 1. the expected operational time of the machine is also 5. respectively.4) = (n − 1)(0. if the component represented by the random variable Y fails last. 5). 0.4) 2 (0. However.6) n −1 n = = (0. for n ≥ 2.42 + 0.5. 1 and 2. the unconditional expected operational time of the machine must be 5 as well.42 + 0. 61 of 65 .09 for 0. Thus. the expected number of people in the car who are hospitalized.49 + 0. 2 n−2 (n − 1)(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. This is represented by the triangle with vertices at (0. Key: D Suppose the component represented by the random variable X fails last. Then X is negative binomial with “success” probability p = 0. the mode is 3. By symmetry.09 ⋅ 0.4) (0.5 ⋅0 + ⋅1 + ⋅ 2 = 0.4) (0.09 ⋅ 0.42 0.49 + 0.4) (1 − 0.49.4 and r = 2 “successes” needed. Because the density is uniform over this region. Let X equal the number of hurricanes it takes for two losses to occur. the mean value of X and thus the expected operational time of the machine is 5.534 0.5 0.138. Thus. (10.6) . 0) and (5. 0.09 ⋅ 0.42 + 0.5 0.
and the row of the middle selected item can then be chosen in any of four ways.00 = 54 .9 ⋅12 (months) ⋅ 5.8 ⋅12 (months) ⋅ 5. The number of permutations of three qualifying items is (30)(20)(12). 142. The answer is thus (10)(6)(5)(4) = 1200. there are 30 − 10 = 20 ways to select the second item.141. there are 30 − 18 = 12 ways to select the third item. Key: C There are 10 (5 choose 3) ways to select the three columns in which the three items will appear.00 = 48 . The row of the rightmost selected item can be chosen in any of six ways. 62 of 65 . The expected bonus for a lowrisk driver is 0. there are 30 ways to select the first item. Alternatively.400 . Because there are 10 squares in the row or column of the first selected item. The expected bonus payment from the insurer is 600 ⋅ 48 + 400 ⋅ 54 = 50. The number of combinations is thus (30)(20)(12)/3! = 1200. the row of the leftmost selected item can then be chosen in any of five ways. Because there are 18 squares in the rows or columns of the first and second selected items. Key: B The expected bonus for a highrisk driver is 0.
75) = f (0. y)dy 0 1 = f (0.75) = ⎨ . ⎩2 / 3 for 0. less than 60 − x minutes are spent in the meeting itself.75. 146. Key: E The total time is less than 60 minutes. 144. The number of TV watchers in the complement of C ∪ N ∪ A ∪ H is thus 100 − 63 = 37 .75) = 11/144 = 0. ⎧4 / 3 for 0 < y < 0.076. the number of TV watchers in the set C ∪ N ∪ A ∪ H is 45 + 18 = 63 .75. Subtract from 1 to get the answer.75. 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 . Key: C f ( y  x = 0. y ) ∫ f (0.143.125 Thus. Because C ∪ N ∪ A and H are mutually exclusive. so if x minutes are spent in the waiting room.01. Key: E P(Pr ∪ Li) = P(Pr) + P(Li ∩ Pr') = 0. 63 of 65 . 145. 1.10 + 0.5 f ( y  x = 0.5 < y < 1 which leads to Var (Y  X = 0. y ) .
2 2 By the memoryless property of the exponential distribution. 148.9 2 2 2 1.000 and therefore variance (1. Key: C 0. X N E Var X 1 .000. Given that EY 0. 000E N 1.9 .000)2 = 1.. 000 N 1. Let be the mean of X. Let X denote the total loss due to the N hurricanes. Then. Let N denote the number of hurricanes. 000(4) 8. 000.9 2 0. 000 64 of 65 . Var X Var E X  N E Var X  N Var E X 1 .000.147. this implies that the probability of a claim exceeding the deductible is 0. 000. Key: A Let X denote the amount of a claim before application of the deductible. X N Var NE X 1 E NVar X 1 Var 1. implies that 2 is the variance of X and E X 2 .. 000. 000 N E 1. 000.992 . 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 . This problem can be solved using the conditional variance formula.9 and thus E Y Var Y 1.82 0. 000. Let X i denote the loss due to the ith hurricane. which is exponentially distributed with mean 1.. 0002 Var N 1. which is Poisson distributed with mean and variance 4.. 000(4) 1. which because X is exponential. Note that independence is used to write the variance of a sum as the sum of the variances. Let Y denote the amount of a claim payment after application of the deductible.82 .
Thus. which is binomial with parameters 1 3 9 1 3 3 and thus has mean 3 and variance 3 . which is 0.24 and variance 0. Var X Var E X  N E Var X  N Var E X 1 . Note that independence is used to write the variance of a sum as the sum of the variances.24 N E 0. X N E Var X 1 . 16 4 65 of 65 .64(0. Let X denote the total unreimbursed loss due to the N accidents.149.0576 0.3) = 0.3)2 0. Key: B Let N denote the number of accidents.0756.8 and therefore variance (0.0576E N 9 3 0.8(0.64.0576 0.0576 ..3 times an exponentially distributed random variable with mean 0. X i has mean 0.8)2 = 0.24 Var N 0. X N Var NE X 1 E NVar X 1 Var 0.0576 N 2 0.. This problem can be solved using the conditional variance formula. 4 4 16 4 4 1 and 4 Let X i denote the unreimbursed loss due to the ith accident...
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