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SOCIETY OF ACTUARIES/CASUALTY ACTUARIAL SOCIETY

EXAM P PROBABILITY

EXAM P SAMPLE SOLUTIONS

Copyright 2007 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.

P-09-07 PRINTED IN U.S.A.

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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
Pr ⎡( G ∪ B ∪ S ) ⎤ = 1 − Pr ( G ∪ B ∪ S )
c
⎣ ⎦
= 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

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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 .

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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 '] )
0.7 + 0.9 = 2 P [ A] + 1 − P ⎡⎣( A ∩ B ) ∪ ( A ∩ B ') ⎤⎦
1.6 = 2 P [ A] + 1 − P [ A]
P [ A] = 0.6

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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,
0.44 = Pr[( R1 I R2 ) U ( B1 I B2 )] = Pr[ R1 I R2 ] + Pr [ B1 I B2 ]
= Pr [ R1 ] Pr [ R2 ] + Pr [ B1 ] Pr [ B2 ]
4 ⎛ 16 ⎞ 6 ⎛ x ⎞
= ⎜ ⎟+ ⎜ ⎟
10 ⎝ x + 16 ⎠ 10 ⎝ x + 16 ⎠
Therefore,
32 3x 3x + 32
2.2 = + =
x + 16 x + 16 x + 16
2.2 x + 35.2 = 3x + 32
0.8 x = 3.2
x=4

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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 .

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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
P ⎡ H ∩ F ⎤⎦ 108 625 108
c

and P ⎡⎣ H | F c ⎤⎦ = ⎣ = = = 0.173
P ⎡⎣ F c ⎤⎦ 937 937 625

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7. 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,
Pr ( A ∩ H ) = 0.15
Pr ( A ∩ H c ) = Pr ( A ) − Pr ( A ∩ H ) = 0.65 − 0.15 = 0.50
Pr ( Ac ∩ H ) = Pr ( H ) − Pr ( A ∩ H ) = 0.50 − 0.15 = 0.35
and the portion of policyholders that will renew at least one policy is given by
0.4 Pr ( A ∩ H c ) + 0.6 Pr ( Ac ∩ H ) + 0.8 Pr ( A ∩ H )
= ( 0.4 )( 0.5 ) + ( 0.6 )( 0.35 ) + ( 0.8 )( 0.15 ) = 0.53 ( = 53% )
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100292 01B-9
8. 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 ] + 0.14
Pr ( C I T ) = 0.22
Pr ( C c I T c ) = 0.12
Therefore,
0.88 = 1 − Pr ⎡⎣C c I T c ⎤⎦ = Pr [C U T ] = Pr [C ] + Pr [T ] − Pr [C I T ]
= Pr [T ] + 0.14 + Pr [T ] − 0.22
= 2 Pr [T ] − 0.08
or
Pr [T ] = ( 0.88 + 0.08 ) 2 = 0.48

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9. 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, we may compute the desired
probability as follows:
Pr ( M c ∩ S c ) = Pr ⎡( M ∪ S ) ⎤ = 1 − Pr ( M ∪ S ) = 1 − ⎡⎣ Pr ( M ) + Pr ( S ) − Pr ( M ∩ S ) ⎤⎦
c
⎣ ⎦
= 1 − Pr ( M ) − Pr ( S ) + Pr ( S M ) Pr ( M ) = 1 − 0.70 − 0.20 + ( 0.15 )( 0.70 ) = 0.205

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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, non-sports). But P ( Ac ∩ Bc) = 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 (Ac ∩ Bc ) = 0.744 =
0.256

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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 CC and DC . As a
result, we see that P[CC ∩ DC] = P[CC] P[DC] = (1 – P[C]) (1 – P[D])
= (1 – 2 0.075 ) (1 – 0.075 ) = 0.33 .

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14 0. Solution: E “Boxed” numbers in the table below were computed. we are told that 1 P[ A ∩ B ∩ C] x = P [ A ∩ B ∩ C | A ∩ B] = = 3 P [ A ∩ B] x + 0. High BP Low BP Norm BP Total Regular heartbeat 0.06 = 1 − 0.60 Page 6 of 56 .12 ) − 0.467 0.04 3 x = 0.64 1.12 ) = x + 0.10 ) − 3 ( 0.85 Irregular heartbeat 0.22 0.56 0.08 0. Solution: C The Venn diagram below summarizes the unconditional probabilities described in the problem. -------------------------------------------------------------------------------------------------------- 13.06 Now we want to find P ⎡( A ∪ B ∪ C ) ⎤ c P ⎡( A ∪ B ∪ C ) | Ac ⎤ = ⎣ ⎦ c ⎣ ⎦ P ⎡⎣ A ⎤⎦ c 1− P[ A ∪ B ∪ C] = 1 − P [ A] 1 − 3 ( 0.02 0.15 Total 0.06 0. In addition. we can see that 20% of patients have a regular heartbeat and low blood pressure.12 It follows that 1 1 x = ( x + 0.05 0.00 From the table.20 0.28 = = 0.12 ) − 0.09 0.10 − 2 ( 0.12.04 3 3 2 x = 0.

Solution: A k 1 11 1 1 1 ⎛1⎞ pk = pk −1 = pk − 2 = ⋅ ⋅ pk −3 = .. 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 = . z =1/4 ⎛ 1 1 1⎞ 1 again leading to w = 1 − ⎜ + + ⎟ = ⎝ 12 6 4 ⎠ 2 Page 7 of 56 .. -------------------------------------------------------------------------------------------------------- 15. 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 1 x+ y+ z = 2 1 1 w = 1− ( x + y + z ) = 1− = 2 2 Alternatively the three equations can be solved to give x = 1/12.04 . x + z = . Therefore. P[N > 1] = 1 – P[N ≤1] = 1 – (4/5 + 4/5 ⋅ 1/5) = 1 – 24/25 = 1/25 = 0. = ⎜ ⎟ p0 k ≥0 5 55 5 5 5 ⎝5⎠ ∞ ∞ k ⎛1⎞ p0 5 1= ∑ p k = ∑ ⎜ ⎟ p0 = k =0 ⎝ 5 ⎠ = p0 1 4 k =0 1− 5 p0 = 4/5 .14.

005h] = P[Y ≤ 0.005h] ⎡ 0. 2 4 0.00562 h 2 + 0. respectively.005h] – P[Y ≥ 0.00356h) . then we are given X1 is N(0.25 = 1 − Pr ( E ) . X2 are X1 + X 2 0. 0.75 ) = 0. Solution: D Let X1 and X2 denote the measurement errors of the less and more accurate instruments.84. it follows Pr ( E ) = 0. It follows that Y = is N (0.9192) – 1 = 0. Then since N1 and N 2 are independent.10 Pr ( O ) = 0. ⎣ 0.005h] – P[Y ≤ −0.4] – 1 = 2(0.75 ) Pr ( O )(1 − 0.σ) denotes a normal random variable with mean μ and standard deviation σ. ) = N(0.00442 h 2 independent.85 = Pr ( O ) + 0. X2 is N(0.00356h ⎥⎦ Page 8 of 56 .40 -------------------------------------------------------------------------------------------------------- 18.75 . Solution: D Let O = Event of operating room charges E = Event of emergency room charges Then 0. 0.75 − Pr ( O )( 0.005h] = P[Y ≤ 0.85 = Pr ( O ∪ E ) = Pr ( O ) + Pr ( E ) − Pr ( O ∩ E ) = Pr ( O ) + Pr ( E ) − Pr ( O ) Pr ( E ) ( Independence ) Since Pr ( E c ) = 0. Solution: D Let N1 and N 2 denote the number of claims during weeks one and two. 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 ⎠ 1 = ∑ n=0 9 7 2 8 1 1 = 9 = 6 = 2 2 64 -------------------------------------------------------------------------------------------------------- 17. respectively.005h ≤ Y ≤ 0.005h] – 1 = 2P ⎢ Z ≤ − 1 = 2P[Z ≤ 1.0044h) and X1. If N(μ. Therefore.16. P[−0.0056h).005h ⎤ = 2P[Y ≤ 0. So 0.

005 )( 0.29 ( 0.49 ) + ( 0.10 ) = 0. Solution: B Apply Baye’s Formula: Pr ⎡⎣Seri.3) + ( 0.06 )( 0. Stab.10 ) ( 0. Seri.⎤⎦ Pr ⎡⎣Surv.9 )( 0.] = ( 0.1584 ( 0.02 )( 0.28) -------------------------------------------------------------------------------------------------------- 20.19. Surv.06 )( 0. Solution: D Let S = Event of a standard policy F = Event of a preferred policy U = Event of an ultra-preferred 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. Crit.08) = 0.⎤⎦ Pr [Stab.03)( 0.001)( 0.40 ) + ( 0.6 )( 0.] = Pr ⎡⎣Surv.3) = 0.9 )( 0.] + Pr ⎡⎣Surv.04 )( 0.] + Pr ⎡⎣Surv.50 ) + ( 0.01)( 0.15) + ( 0. Seri. Let A = Event of an accident B1 = Event the driver’s age is in the range 16-20 B2 = Event the driver’s age is in the range 21-30 B3 = Event the driver’s age is in the range 30-65 B4 = Event the driver’s age is in the range 66-99 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 ) = ( 0.99 )( 0.1) + ( 0. Solution: B Apply Bayes’ Formula.6 ) Page 9 of 56 .⎤⎦ Pr [Seri.⎤⎦ Pr [ Crit.⎤⎦ Pr [Seri.001)( 0.08) + ( 0.0141 -------------------------------------------------------------------------------------------------------- 21.

31) -------------------------------------------------------------------------------------------------------- 24.16) + (0. Solution: D Let H = Event of a heavy smoker L = Event of a light smoker N = Event of a non-smoker D = Event of a death within five-year period 1 Now we are given that Pr ⎡⎣ D L ⎤⎦ = 2 Pr ⎡⎣ D N ⎤⎦ and Pr ⎡⎣ D L ⎤⎦ = Pr ⎡⎣ D H ⎤⎦ 2 Therefore.4 2 ⎣ -------------------------------------------------------------------------------------------------------- 23. (0.04)(0.45) + (0.22 .15)(0.5 ) + Pr ⎡⎣ D L ⎤⎦ ( 0.05)(0.25 + 0.22.08)(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. upon applying Bayes’ Formula.3) + 2 Pr ⎡⎣ D L ⎤⎦ ( 0. Solution: B Observe Pr [1 ≤ N ≤ 4] ⎡ 1 1 1 1 ⎤ ⎡1 1 1 1 1⎤ Pr ⎡⎣ N ≥ 1 N ≤ 4 ⎤⎦ = =⎢ + + + ⎥ ⎢ + + + + ⎥ Pr [ N ≤ 4] ⎣ 6 12 20 30 ⎦ ⎣ 2 6 12 20 30 ⎦ 10 + 5 + 3 + 2 20 2 = = = 30 + 10 + 5 + 3 + 2 50 5 Page 10 of 56 .4 = = = 0. 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) + (0.2 ) 0.08)(0.42 1 Pr ⎡ D L ⎤⎦ ( 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 ] (0.2 ) 0.3 + 0.16) = = 0.

16) = = 0. 1998 or 1999. we find that P[C⏐S] = P[ S C ]P[C ] + P[ S C C ]( P[C C ]) 2 P[ S C C ]P[C ] 2(0. (0. Solution: D Use Baye’s Theorem with A = the event of an accident in one of the years 1997.01) + (0.02)(0.18) + (0.16) + (0.657 .45 . 25.005)(0. 2 P[ S C ]P[C ] + P[ S C ](1 − P[C ]) C C 2(0.05)(0.95)(0.20) -------------------------------------------------------------------------------------------------------- Page 11 of 56 . Solution: C Let: S = Event of a smoker C = Event of a circulation problem Then we are given that P[C] = 0.01) P[D|Y] = = = 0.25) 2 2 = = = = .05)(0. P[Y | D]P[ D] + P[Y |~ D]P[~ D] (0.25) + 0.75 2 + 3 5 -------------------------------------------------------------------------------------------------------- 27.99) -------------------------------------------------------------------------------------------------------- 26.03)(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 and P[S⏐C] = 2 P[S⏐CC] P[ S C ]P[C ] Now applying Bayes’ Theorem. P[ A 1997]P[1997] P[1997|A] = P[ A 1997][ P[1997] + P[ A 1998]P[1998] + P[ A 1999]P[1999] (0.95)(0.

Then T is exponentially distributed with unknown parameter λ .7) =1–e = 1 – (0.90 ) = 0.334 )( 4 / 5) -------------------------------------------------------------------------------------------------------- 29. P [ C | I1 ] = ( 0.141 29 P ⎡⎣ I1 | C c ⎤⎦ = ( 130 ) ( 0. -------------------------------------------------------------------------------------------------------- 30. Page 12 of 56 .141)(1/ 5) + ( 0.435 .7 or λ = − (1/50) ln(0. Now we are given that 50 ∫ λe − λt 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. Solution: D e− λ λ 2 e− λ λ 4 Let N be the number of claims filed. e–50λ = 0.98 ) = 0.7) 80 ∫ λe − λt It follows that P[T ≤ 80] = dt = −e− λt 80 0 = 1 – e–80λ 0 (80/50) ln(0.334 29 Therefore. Var[N] = λ = 2 .3 = P[T ≤ 50] = dt = −e− λt 50 = 1 – e–50λ 0 0 Therefore.141)(1/ 5) = 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 P [ I1 | C ] = ( 130 ) ( 0.096 ( 0. 28.7)80/50 = 0.02 )( 0.10 )( 0. We are given P[N = 2] = =3 = 3 ⋅ P[N 2! 4! = 4]24 λ2 = 6 λ4 λ2 = 4 ⇒ λ = 2 Therefore. Solution: C Let T denote the number of days that elapse before a high-risk driver is involved in an accident.

and Z Then f is a trinomial probability function. so Pr [ z ≥ x + 2] = f ( 0.0488 Page 13 of 56 . 000 -------------------------------------------------------------------------------------------------------- 32.20 ) 4 3 3 2 2 2!2! = 0. Y. Solution: D Let X denote the number of employees that achieve the high performance level.30 ) ( 0. 2 ) 4! = ( 0. equivalently.02 .50 )( 0.01 or.31. 0. Solution: D Let X = number of low-risk drivers insured Y = number of moderate-risk drivers insured Z = number of high-risk drivers insured f(x.668 20 ( 0.993 Consequently.99 ≤ Pr [ X ≤ x ] = ∑ k =0 ( 20k ) ( 0.3) + f ( 0.20 ) + 4 ( 0.02 ) ( 0. Now we want to determine x such that Pr [ X > x ] ≤ 0.98 ) = 0.668 20 0 0. y.272 19 1 0. 4 ) + f (1. z) = probability function of X.053 2 18 2 0.20 ) + ( 0.20 ) + 4 ( 0.02 )( 0. 000 or C = 60.1.3) + f ( 0.98) = 0.98 ) x k 20 − k The following table summarizes the selection process for x: x Pr [ X = x ] Pr [ X ≤ x ] ( 0. 2. 0.30 )( 0.98 ) = 0.940 190 ( 0. We conclude that we should choose the payment amount C such that 2C = 120. there is less than a 1% chance that more than two employees will achieve the high performance level. 0.02 ) ( 0. Then X follows a binomial distribution with parameters n = 20 and p = 0.

Pr [ X > 16] 200 − 20 (16 ) + 1 2 (16 ) 2 8 1 Pr ⎡⎣ X > 16 X > 8⎤⎦ = = = = Pr [ X > 8] 200 − 20 ( 8 ) + ( 8 ) 1 2 72 9 2 -------------------------------------------------------------------------------------------------------- 34.005 ⎜ 200 − 20 x + x 2 ⎟ ⎝ 2 ⎠ ⎝ 2 ⎠ where 0 < x < 20 . determine the proportionality constant C from the condition ∫ 040 f ( x)dx =1: 40 2 1 = ∫ f ( x)dx = − C (10 + x) −1 |040 = C 0 25 25 so that C = = 12. Therefore. Solution: C We know the density has the form C (10 + x ) for 0 < x < 40 (equals zero otherwise). calculate P(T < 5) by integrating f (x) = 12. or 12. First.33. calculate the probability over the interval (0.5 ) = 0.47 . determine the proportionality constant C from the condition ∫ 0 f ( x)dx =1 : 40 C C 2 1 = ∫ C (10 + x ) dx = − C (10 + x) −1 40 −2 − = = C 0 0 10 50 25 so C = 25 2 . Then.005 ⎜ 20t − t 2 ⎟ 20 20 x x ⎝ 2 ⎠ ⎛ 1 ⎞ ⎛ 1 ⎞ = 0. Page 14 of 56 . −2 40 First. Solution: B Note that ⎛ 1 ⎞ Pr [ X > x ] = ∫0.5 (10 + x)−2 2 over the interval (0. Solution: C Let the random variable T be the future lifetime of a 30-year-old.5∫ (10 + x ) dx = − (10 + x ) = ⎜ − ⎟ (12.005 ( 20 − t ) dt = 0. 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 .005 ⎜ 400 − 200 − 20 x + x 2 ⎟ = 0. 6): −1 6 ⎛1 1⎞ 12.5). Then.5. 6 −2 0 0 ⎝ 10 16 ⎠ -------------------------------------------------------------------------------------------------------- 35.

1 = (0.239 i = 1.393) + 100(0.6)5 = 0.000⏐V > 10. note that 1 k k 1 = ∫ k (1 − y ) dy = − (1 − y ) 1 = 4 5 0 5 0 5 k=5 We next need to find P[V > 10. 36.000] P[V > 40.078 = = = = 0. Y100 where ⎧ 200 with probability 0.000] = P[Y > 0.393 ⎪ Yi = ⎨100 with probability 0. . 000] 0.590 -------------------------------------------------------------------------------------------------------- 37. .239 1 Next.000 Y > 10.4 It now follows that P[V > 40. Solution: D Let T denote printer lifetime.9)5 = 0.4 = (0.000] 0. denote refunds for the 100 printers sold by independent and identically distributed random variables Y1.368 Now E[Yi] = 200(0.56 100 Therefore. .59 and P[V > 40. P[V > 10.393 0 2 0 2 1 ∫ 2e −t / 2 2 P[1 ≤ T ≤ 2] = dt = e− t / 2 1 = e –1/2 − e –1 = 0. 000 ∩ V > 10.000] = P[Y > 0.132 . Solution: B To determine k. . 100 ⎪0 ⎩ with probability 0. 0 ≤ t ≤ ∞ Note that 1 1 P[T ≤ 1] = ∫ e −t / 2 dt = e− t / 2 1 = 1 – e–1/2 = 0. 0. Expected Refunds = ∑ E [Y ] = 100(102. .000] = P[100.1] 1 ∫ 5 (1 − y ) dy = − (1 − y ) 4 5 1 = 0. Then f(t) = ½ e–t/2. i =1 i Page 15 of 56 . 000] P[V > 10.000 Y > 40.4] = 0. .078 . 000] P[V > 40. .239) = 102.56) = 10.256 .1 1 ∫ 5 (1 − y ) dy = − (1 − y ) 4 5 1 = P[100. . 000] 0.

Then F ( x ) = Pr [ X ≤ x ] = ∫ 3t −4 dt = −t −3 = 1 − x −3 x x 1 1 Using this result.5 ) (1.5+ C 0. Then ⎧0 if 0 < X ≤ C Y =⎨ ⎩ X − C if C < X < 1 Now we are given that 0. Solution: A Let F denote the distribution function of f.95)20(0. Solution: E Let X be the number of hurricanes over the 20-year period.358 + 0.189 = 0. -------------------------------------------------------------------------------------------------------- 40. solving for C.5 ) − ( 2 ) −3 −3 3 ⎛3⎞ = = = 1− ⎜ ⎟ = 0.5] = = Pr [ X ≥ 1.5 Finally.5 + C ) 2 2 0 0 Therefore.5 ) (1. It follows that P[X < 2] = (0.377 + 0.5 ) = Pr ( 0 < X < 0. since 0 < C < 1 .95)18(0.5] Pr [ X ≥ 1. we conclude that C = 0.05) + 190(0.8 − 0.925 .578 1 − F (1. The conditions of the problem give x is a binomial distribution with n = 20 and p = 0.95)19(0.5 + C ) = ∫ 2 x dx = x = ( 0.05)2 = 0.05)0 + 20(0.5 ) −3 ⎝4⎠ -------------------------------------------------------------------------------------------------------- 39.5 ) ⎤⎦ Pr [ X < 2] − Pr [ X ≤ 1.05 .3 Page 16 of 56 .64 = Pr (Y < 0. 38. we find C = ±0. we see Pr ⎡⎣( X < 2 ) ∩ ( X ≥ 1. Solution: B Denote the insurance payment by the random variable Y.5] F ( 2 ) − F (1.5] Pr [ X < 2| X ≥ 1.5 + C 0.

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. Therefore. Solution: E Let X = number of group 1 participants that complete the study.376] = 0. 000 − 10.376][1 − 0. 000 = −1.8 ⎤ ⎡1 − 10 0.2 0. { P ⎡⎣( X ≥ 9 ) ∩ ( Y < 9 ) ⎤⎦ ∪ ⎡⎣( X < 9 ) ∩ ( Y ≥ 9 ) ⎤⎦ } = P ⎡⎣( X ≥ 9 ) ∩ ( Y < 9 ) ⎤⎦ + P ⎡⎣( X < 9 ) ∩ ( Y ≥ 9 ) ⎤⎦ = 2 P ⎡⎣( X ≥ 9 ) ∩ ( Y < 9 ) ⎤⎦ (due to symmetry) = 2 P [ X ≥ 9 ] P [Y < 9 ] = 2 P [ X ≥ 9] P [ X < 9] (again due to symmetry) = 2 P [ X ≥ 9] (1 − P [ X ≥ 9] ) = 2 ⎡( 10 ⎣ 9 ) ( )( ) ( 10 ) ( ) ⎦ ⎣ ( 9 ) ( )( ) ( 10 ) ( ) ⎦ 0.40 )( 0.469 -------------------------------------------------------------------------------------------------------- 42.30 ) + ( 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 { Pr ⎡⎣ I AC ∩ I B ⎤⎦ ∪ ⎡⎣( I A ∩ I B ) ∩ ( X A < X B ) ⎤⎦ } = Pr ⎡⎣ I AC ∩ I B ⎤⎦ + Pr ⎡⎣( I A ∩ I B ) ∩ ( X A < X B ) ⎤⎦ = Pr ⎡⎣ I AC ⎤⎦ Pr [ I B ] + Pr [ I A ] Pr [ I B ] Pr [ X A < X B ] (independence) = ( 0.41.8 + 10 0. Therefore.18 + 0. Now we are given that X and Y are independent.12 Pr [ X B − X A ≥ 0] Now X B − X A is a linear combination of independent normal random variables.8 ⎤ 9 10 9 10 = 2 [ 0.60 )( 0.30 ) Pr [ X B − X A ≥ 0] = 0.8 − 10 0. Y = number of group 2 participants that complete the study. 000 and standard deviation σ = Var ( X B ) + Var ( X A ) = ( 2000 ) + ( 2000 ) = 2000 2 2 2 It follows that Page 17 of 56 .2 0.

Solution: D If a month with one or more accidents is regarded as success and k = the number of failures before the fourth success.2898 ⎝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.354] = 1 − 0. then k follows a negative binomial distribution and the requested probability is 4 k 3+ k ⎛ 3 ⎞ ⎛ 2 ⎞ Pr [ k ≥ 4] = 1 − Pr [ k ≤ 3] = 1 − ∑ ( k ) ⎜ ⎟ ⎜ ⎟ 3 k =0 ⎝5⎠ ⎝ 5⎠ ⎛ 3⎞ 4 ⎡ 3 ⎛ 2 ⎞0 4 ⎛ 2 ⎞1 5 ⎛ 2 ⎞ 2 6 ⎛ 2 ⎞3 ⎤ = 1− ⎜ ⎟ ⎢( 0 ) ⎜ ⎟ + ( 1 ) ⎜ ⎟ + ( 2 ) ⎜ ⎟ + ( 3 ) ⎜ ⎟ ⎥ ⎝5⎠ ⎢⎣ ⎝ 5 ⎠ ⎝5⎠ ⎝5⎠ ⎝ 5 ⎠ ⎥⎦ 4 ⎛ 3 ⎞ ⎡ 8 8 32 ⎤ = 1 − ⎜ ⎟ ⎢1 + + + ⎥ ⎝ 5 ⎠ ⎣ 5 5 25 ⎦ = 0.362 Finally.638 = 0. { } Pr ⎡⎣ I AC ∩ I B ⎤⎦ ∪ ⎡⎣( I A ∩ I B ) ∩ ( X A < X B ) ⎤⎦ = 0. ⎡ 1000 ⎤ Pr [ X B − X A ≥ 0] = Pr ⎢ Z ≥ (Z is standard normal) ⎣ 2000 2 ⎥⎦ ⎡ 1 ⎤ = Pr ⎢ Z ≥ ⎣ 2 2 ⎥⎦ ⎡ 1 ⎤ = 1 − Pr ⎢ Z < ⎣ 2 2 ⎥⎦ = 1 − Pr [ Z < 0.223 -------------------------------------------------------------------------------------------------------- 43.362 ) = 0.2898 Alternatively the solution is 4 4 4 2 4 3 ⎛ 2⎞ 4 ⎛ 2⎞ 3 5 ⎛ 2⎞ ⎛ 3⎞ 6 ⎛ 2⎞ ⎛ 3⎞ ⎜ ⎟ + ( 1 ) ⎜ ⎟ + ( 2 ) ⎜ ⎟ ⎜ ⎟ + ( 3 ) ⎜ ⎟ ⎜ ⎟ = 0.18 + ( 0.12 )( 0. and iii) calculating Pr [ k ≤ 3] Page 18 of 56 .

0 < t < ∞ 3 Therefore. 5 Thus. Solution: D 0 4 x2 4 x 2 x3 x3 8 64 56 28 Note that E ( X ) = ∫ − dx + ∫ 0 dx = − + =− + = = − 2 10 0 10 30 −2 30 0 30 30 30 15 -------------------------------------------------------------------------------------------------------- 46. Solution: D The density function of T is 1 f ( t ) = e−t / 3 . E [ X ] = E ⎡⎣ max ( T . 2. Solution: C If k is the number of days of hospitalization. the expected payment is ∑ g (k ) p k =1 k = 100 p1 + 200 p2 + 300 p3 + 350 p4 + 400 p5 = 1 (100 × 5 + 200 × 4 + 300 × 3 + 350 × 2 + 400 ×1) =220 15 -------------------------------------------------------------------------------------------------------- 45. 2 ) ⎤⎦ 2 −t / 3 ∞ t =∫ 2 e dt + ∫ e− t / 3 dt 0 3 2 3 ∞ = −2e − t / 3 | 02 −te− t / 3 | ∞2 + ∫ e− t / 3 dt 2 −2 / 3 −2 / 3 = −2e + 2 + 2e − 3e− t / 3 | ∞2 = 2 + 3e −2 / 3 Page 19 of 56 . 3 300 + 50 (k − 3) for k = 4. then the insurance payment g(k) is g(k) = 100k { for k =1. 5.44.

3 f (X ) = ⎨ ⎪⎩300 + 25 ( X − 3) if X = 4. Solution: E Let X and Y denote the year the device fails and the benefit amount. Next define the payment ⎧x for 0 ≤ T ≤ 1 ⎪x ⎪ P under the insurance contract by P = ⎨ for 1 < T ≤ 3 ⎪ 2 ⎪⎩0 for T > 3 We want to find x such that 1 3 1 x –t/10 x 1 –t/10 x 1000 = E[P] = ∫ ∫1 2 10 e dt = − xe − t /10 e dt + − e −t /10 3 1 0 10 0 2 = −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. x −1 and ⎧⎪1000 ( 5 − x ) if x = 1. Then ⎧⎪100 X if X = 1. 2. x = 1.4 ) 2 3 = 2694 -------------------------------------------------------------------------------------------------------- 49.6 ) ( 0.6 ) ( 0. -------------------------------------------------------------------------------------------------------- 48.4 ) + 1000 ( 0.3. We are given that T is exponentially distributed with parameter λ = 10 since 10 = E[T] = λ .4 ) ..5 and Page 20 of 56 . Solution: D Define f ( X ) to be hospitalization payments made by the insurance policy. 2. Then the density function of X is given by f ( x ) = ( 0.3.1772x .6 )( 0.47..4 ) + 3000 ( 0. Solution: D Let T be the time from purchase until failure of the equipment. respectively.6 ) ( 0.4 ) + 2000 ( 0. 2. 4 y=⎨ ⎪⎩0 if x > 4 It follows that E [Y ] = 4000 ( 0. We conclude that x = 5644 .

5(2)1.000 e + E[10. .000 (3/2) – 10.5 (0. 000(n − 1) n! = 10.6) 2.000 = 7.6 (2) 2.5 2(0.5(0.5 2. and let P be the amount paid to (3 / 2) n e −3/ 2 the company under the policy.5 ⎤ 2 2.6∫ x 2.5 2(0.6) 2.6) 2.5 ∫ ⎢ x3.5(0.6 ⎣ x 2.5 2.000N] – E[10.5 1. n = 0.5(0.6) 2. –3/2 -------------------------------------------------------------------------------------------------------- 51. and n! ⎧0 for N = 0 P=⎨ .5(0. Then Pr[N = n] = .9343 .5 ⎥⎦ ∫2 ⎢⎣ x3.5 2 Page 21 of 56 . ⎩10.5(0.000 e–3/2 + n=0 ∑10.5 =− 2 + = − + + 1.231 .6) 2.6) 2.6) 2. 1. Solution: C Let Y denote the manufacturer’s retained annual losses.5 ⎥⎦ 0.5 x1. .33 3 3 -------------------------------------------------------------------------------------------------------- 50.5 ∞ and E[Y] = x dx + 2 dx = dx − 0. 1. 000(n − 1) n =1 n! ∞ (3 / 2) n e −3/ 2 = 10.5 2 2.5 ⎤ ⎡ 2. 2. 5 E ⎡⎣ f ( X ) ⎤⎦ = ∑ f ( k ) Pr [ X = k ] k =1 ⎛5⎞ ⎛ 4⎞ ⎛ 3⎞ ⎛ 2⎞ ⎛1⎞ = 100 ⎜ ⎟ + 200 ⎜ ⎟ + 300 ⎜ ⎟ + 325 ⎜ ⎟ + 350 ⎜ ⎟ ⎝ 15 ⎠ ⎝ 15 ⎠ ⎝ 15 ⎠ ⎝ 15 ⎠ ⎝ 15 ⎠ 1 640 = [100 + 160 + 180 + 130 + 70] = = 213.5(0. 000( N − 1) for N ≥ 1 ∞ (3 / 2) n e −3/ 2 Now observe that E[P] = ∑10.6 < x ≤ 2 Then Y = ⎨ ⎩2 for x > 2 ∞ 2 ⎡ 2.000] = 10.6) 2.000 (N – 1)] = 10.000 e–3/2 + E[10.6) 2. ⎧x for 0.5 0. Solution: C Let N be the number of major snowstorms per year.6)1. .5 = 0.5 1.5(0.000 e–3/2 + 10.

.05) = . Solution: D ⎧y for 1 < y ≤ 10 Let W denote claim payments.5 137 N 137 N Now because of the deductible of 2. 3 ⎛ 1 ⎞ ⎡ 3 ⎤ ⎡ 3 ⎤ P = E [ X ] = ∑ N =3 ( N − 2 ) = (1) ⎜ 5 ⎟+ 2⎢ ⎥ + 3⎢ ⎥ = 0. Then W = ⎨ ⎩10 for y ≥ 10 10 ∞ 2 2 2 10 10 ∞ It follows that E[W] = ∫ y 3 dy + ∫ 10 3 dy = − − 2 = 2 – 2/10 + 1/10 = 1. 1 y 10 y y1 y 10 Page 22 of 56 .0314 137 N ⎝ 137 ⎠ ⎣137 ( 4 ) ⎦ ⎣137 ( 5 ) ⎦ -------------------------------------------------------------------------------------------------------- 53. N = 1.9 . if N ≤ 2 X =⎨ ⎩N − 2 .. the net annual premium P = E [ X ] where ⎧0 . Solution: A Let us first determine K. 52. Observe that ⎛ 1 1 1 1⎞ ⎛ 60 + 30 + 20 + 15 + 12 ⎞ ⎛ 137 ⎞ 1 = K ⎜1 + + + + ⎟ = K ⎜ ⎟=K⎜ ⎟ ⎝ 2 3 4 5⎠ ⎝ 60 ⎠ ⎝ 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 = ( 0... if N > 2 Then.

5 + 2e −0.28 + ( 0.408 ) = 0. du = dx.020012 )( 2.28 + ( 0.5 ) = 0.04 )( 0. Solution: C k The pdf of x is given by f(x) = .020012 ) ⎡ ∫ xe − x / 2 dx − ∫ e− x / 2 dx ⎤ + 0.28 + ( 0.28 + ( 0.94 )( 0 ) + ( 0.020012 ) ⎡ −30e −7.5 + 2e−0.5 + 2e −0.5 − 2e−7. Then ⎧0 with probability 0. To find k.020012 ) ( −30e −7.02 )(14 ) 15 1 = ( 0. 54. ⎣ −2 −3 ⎦1 ⎣ 2 3⎦ 4 1 u 1 Page 23 of 56 . x − 1) with probability 0.04 ⎪14 ⎩ with probability 0.328 (in thousands) It follows that the expected claim payment is 328 .02 and E [Y ] = ( 0.28 15 15 ⎢⎣ 1 1 ⎥⎦ = 0.5 + 2e −0.020012 ) ( −32e −7.5 + 4e −0. note (1 + x) 4 ∞ k k 1 ∞ k 1=∫0 (1 + x)4 dx = − 3 (1 + x)3 0 = 3 k=3 ∞ 3x It then follows that E[x] = ∫ (1 + x) 0 4 dx and substituting u = 1 + x.5 ) = 0. Solution: B Let Y denote the claim payment made by the insurance company. we see ∞ ∞ ∞ 3(u − 1) ⎡ u −2 u −3 ⎤ ⎡1 1⎤ E[x] = ∫ du = 3 ∫ (u −3 − u −4 ) du = 3 ⎢ − ⎥ = 3 ⎢ − ⎥ = 3/2 – 1 = ½ .020012 ) ⎡⎣ −30e −7.020012 ) ⎡ −2 xe − x / 2 | 115 +2∫ e − x / 2 dx − ∫ e− x / 2 dx ⎤ 15 15 ⎣⎢ 1 1 ⎦⎥ = 0.5 − 2e− x / 2 | 15 1 ⎦ ⎤ = 0. 0 < x < ∞ .5 + ∫ e− x / 2 dx ⎤ 15 ⎢⎣ 1 ⎥⎦ = 0.94 ⎪ Y = ⎨Max ( 0.5003) ∫ ( x − 1) e− x / 2 dx + ( 0.28 + ( 0.28 + ( 0. -------------------------------------------------------------------------------------------------------- 55.

000 Mx″(t) = = (1 − 2500t )6 (1 − 2500t )6 Then E[X] = Mx′ (0) = 10. 000)(−5)(−2500) 125.5 = (1 – 2t)–10 Therefore.560 Page 24 of 56 .000 Var[ X ] = 5. Solution: E Let XJ. we want to choose D so that 1 ( x − D) 2 1000 (1000 − D) 2 1000 1 1 500 = ∫ ( x − D)dx = = 4 D 1000 1000 2 D 2000 (1000 – D)2 = 2000/4 ⋅ 500 = 5002 1000 – D = ± 500 D = 500 (or D = 1500 which is extraneous). Then X = XJ + XK + XL and due to independence M(t) = E ⎡⎣e xt ⎤⎦ = E ⎡⎣e( J K L ) ⎤⎦ = E ⎡⎣e xJ t ⎤⎦ E ⎡⎣ e xK t ⎤⎦ E ⎡⎣e xLt ⎤⎦ x +x +x t = MJ(t) MK(t) ML(t) = (1 – 2t)–3 (1 – 2t)–2.000. -------------------------------------------------------------------------------------------------------- 57.000. 000 First.000 – (10.000. -------------------------------------------------------------------------------------------------------- 58.560(1 – 2t)–13 E[X3] = M″′(0) = 10. XK.5 (1 – 2t)–4.000 E[X2] = Mx″ (0) = 125. Solution: B 1 We are given that Mx(t) = for the claim size X in a certain class of accidents. respectively. M′(t) = 20(1 – 2t)–11 M″(t) = 440(1 – 2t)–12 M″′(t) = 10. and L.000 Var[X] = E[X2] – {E[X]}2 = 125. and XL represent annual losses for cities J. 56.000)2 = 25. ⎧0 for 0 ≤ X ≤ D That is Y = ⎨ ⎩ x − D for D < X ≤ 1 Then since E[X] = 500. Solution: C Let Y represent the payment made to the policyholder for a loss subject to a deductible D. (1 − 2500t ) 4 (−4)(−2500) 10. compute Mx′(t) = = (1 − 2500t ) 5 (1 − 2500t )5 (10. K. 000.000 .

2X and Var[Y] = Var[1.2X] = (1. is found by ¾ = zQ1 ∞ f(x) dx .59.5 F ( x) = ∫ x dt = = 1− .2)2(260) = 374 .5 or Q1 = 200 (4/3)0. ¾ = (200/Q1)2.2)2 Var[X] = (1. That is. Solution: A The first quartile.30 ) ( 0.4 . -------------------------------------------------------------------------------------------------------- 61.5 x 2.5 200 th Therefore.06 ( 0. Similarly. Page 25 of 56 .5 ( 200 ) − ( 200 ) ( 200 ) 2. x > 200 200 t 3.5 = F ( xp ) = 1− p 2.5 2.2 .01 p ) = 25 xp 200 xp = (1 − 0. respectively. Q3.5 100 xp ( 200 ) 2.4 = 348. the third quartile. The interquartile range is the difference Q3 – Q1 . Then Y = 1.5 1 − 0.01 p = 2.4 = 224. the p percentile x p of X is given by ( 200 ) 2.5 xp 200 (1 − 0.5 t 2.5 x 2. Q1. is given by Q3 = 200 (4)0. Solution: B The distribution function of X is given by 2.70 ) 25 25 -------------------------------------------------------------------------------------------------------- 60.01 p ) 25 200 200 It follows that x 70 − x 30 = − = 93. Solution: E Let X and Y denote the annual cost of maintaining and repairing a car before and after the 20% tax.

Solution: C ⎧ X if 0 ≤ X ≤ 4 Note Y = ⎨ ⎩4 if 4 < X ≤ 5 Therefore.62. Solution: C First note that the density function of X is given by ⎧1 ⎪2 if x =1 ⎪⎪ f ( x ) = ⎨ x − 1 if 1< x < 2 ⎪ ⎪ ⎪⎩0 otherwise Then 2 1 ⎛1 1 ⎞ 1 1 ( ) E ( X ) = + ∫ x ( x − 1) dx = + ∫ x 2 − x dx = + ⎜ x3 − x 2 ⎟ 2 2 2 1 2 1 2 ⎝3 2 ⎠1 1 8 4 1 1 7 4 = + − − + = −1 = 2 3 2 3 2 3 3 2 1 ⎛1 1 ⎞ ( ) 1 1 ( ) = + ∫ x 2 ( x − 1) dx = + ∫ x3 − x 2 dx = + ⎜ x 4 − x3 ⎟ 2 2 2 E X 2 1 2 1 2 ⎝4 3 ⎠1 1 16 8 1 1 17 7 23 = + − − + = − = 2 4 3 4 3 4 3 12 2 23 ⎛ 4 ⎞ Var ( X ) = E X( ) − ⎡⎣ E ( X ) ⎤⎦ = 23 16 5 2 2 −⎜ ⎟ = − = 12 ⎝ 3 ⎠ 12 9 36 -------------------------------------------------------------------------------------------------------- 63.71 15 ⎝ 5 ⎠ Page 26 of 56 . 41 54 1 4 E [Y ] = ∫ xdx + ∫ dx = x 2 | 04 + x| 54 0 5 4 5 10 5 16 20 16 8 4 12 = + − = + = 10 5 5 5 5 5 41 5 16 1 16 E ⎡⎣Y 2 ⎤⎦ = ∫ x 2 dx + ∫ dx = x 3 | 04 + x| 54 0 5 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 ] ) = 2 − ⎜ ⎟ = 1.

05 + 0.10) + 40(0. respectively. X4).79] = [33.10 = 0.10 + 0. and X4 denote the four independent bids with common distribution function F.79] Therefore.64. 028 − ( 521) 2 2 Var [Y ] = 403 -------------------------------------------------------------------------------------------------------- 66. 76.10) + 1600(0.10) + 6400(0. Then if we define Y = max (X1. Solution: B Let X and Y denote repair cost and insurance payment. Solution: A Let X denote claim size.30)] = (3 + 3 + 2 + 10 + 6 + 7 + 24) = 55 E[X2] = 400(0. Then ⎧0 if x ≤ 250 Y =⎨ ⎩ x − 250 if x > 250 and 2 1 1 2 1500 1250 E [Y ] = ∫ ( ) ( ) 250 1500 x − 250 dx = x − 250 = = 521 250 1500 3000 3000 1 1 12503 ( x − 250 ) dx = ( x − 250 ) 1500 1500 E ⎡⎣Y 2 ⎤⎦ = ∫ = = 434.79 . the proportion of claims within one standard deviation is 0.00 – 21.79.15) + 900(0.20) + 60(0. X3. in the event the auto is damaged.10) + 4900(0. ≤ y≤ 4 16 2 2 It then follows that the density function g of Y is given by Page 27 of 56 .00 + 21.05) + 2500(0. Solution: E Let X1. X2.21. 028 2 3 250 250 1500 4500 4500 Var [Y ] = E ⎡⎣Y 2 ⎤⎦ − { E [Y ]} = 434. 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 = (1 + sinπ y ) . Now the range of claims within one standard deviation of the mean is given by [55.10) + 80(0.30) = 60 + 90 + 80 + 500 + 360 + 490 + 1920 = 3500 Var[X] = E[X2] – (E[X])2 = 3500 – 3025 = 475 and Var[ X ] = 21. 55. X3. X2.05) + 50(0.20 + 0.15) + 30(0.10) + 70(0.20) + 3600(0.45 . Then E[X] = [20(0. -------------------------------------------------------------------------------------------------------- 65.

6 ⎟ ⎝ k! ⎠ ( 0.6 ) k ∞ = 2000e −0.6 + ( 2000 ) e −0. g ( y ) = G '( y ) 1 = (1 + sinπ y ) (π cosπ y ) 3 4 π 3 5 = cosπ y (1 + sinπ y ) ≤ y≤ 3 .6 k ⎞ = 1000 ( 0.6 k! ⎛ ∞ 0.6 − ⎡( 2000 ) − (1000 ) ⎤ ( 0.6k E ⎡⎣Y 2 ⎤⎦ = (1000 ) ( 0.6 ( 0.6 ) e−0.6 ∑ k =0 − e−0.6k = ( 2000 ) e −0.6 ) e −0. The probability function for X is e −0.6 ∑ k = 2 2 2 ∞ k! 0.893 Var [Y ] = E ⎡⎣Y 2 ⎤⎦ − { E [Y ]} = 816.6 ∑ k =0 k! − 2000e −0. 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 =⎨ ⎩2000 if x ≥ 2 where x is a Poisson random variable with mean 0.6 ) e−0.6 ) e + 2000e ∑ k = 2 −0.6 ∑ k =0 − ( 2000 ) e −0.6 E [Y ] = 0 + 1000 ( 0. 4 2 2 Finally.6 ) e −0.6 − 1000 ( 0.6 2 ∞ 2 2 2 k! ⎣ ⎦ = ( 2000 ) − ( 2000 ) e −0.6 + 2000 ⎜ e −0.6 −0.6 − ( 0.6 − 600e−0.564 2 2 Var [Y ] = 699 Page 28 of 56 .6 ) k p ( x) = k = 0.6 )e−0.6 2 2 2 2 ⎣ ⎦ = 816.6 .3 and k! k ∞ 0.6 = 573 0.6 ) e −0. E [Y ] = ∫ yg ( y ) dy 5/ 2 3/ 2 π ycosπ y (1 + sinπ y ) dy 5/ 2 =∫ 3 3/ 2 4 -------------------------------------------------------------------------------------------------------- 67. 2.1.6 − ⎡( 2000 ) − (1000 ) ⎤ ( 0.893 − ( 573) = 488.6 = 2000 − 2000e −0.

95 = = = 1 − e1/ 3e − p95 / 300 1 − (1 − e −100 / 300 ) e −1/ 3 e − p95 / 300 = 0. P[ X > 100] 1 − F (100) Now F(x) = 1 – e–x/300 . t > 0 Since we are told that T has a median of four hours.95 = = where F(x) is the distribution function of X . We are given that X follows an exponential distribution with mean 300. Solution: C Note that X has an exponential distribution. Then Y = ⎨ and we want to find m such that 0.50 ⎩250 for x ≥ 250 m = ∫ 0.004 x dx = −e−0.004m = 0. we want to find p95 such that Pr[100 < x < p95 ] F ( p95 ) − F (100) 0. Pr (T ≥ 5 ) = 1 − F ( 5 ) = e −5 θ = e 4 = 2−5 4 = 0.05 e–1/3) = 999 Page 29 of 56 .004 . -------------------------------------------------------------------------------------------------------- 69. 1 − e − p95 / 300 − (1 − e −100 / 300 ) e −1/ 3 − e − p95 / 300 Therefore. Now let Y denote the ⎧x for x < 250 claim benefits paid.004e −0. c = 0. Therefore. and we are asked to find the 95th percentile of all claims that exceed 100 . Consequently.29 . Solution: E Let X denote actual losses incurred.004m 0 This condition implies e–0.5 ⇒ m = 250 ln 2 = 173. we may determine θ as follows: 1 = F ( 4 ) = 1 − e −4 θ 2 1 = e −4 θ 2 4 − ln ( 2 ) = − θ 4 θ= ln ( 2 ) 5ln ( 2 ) − Therefore.004 x m 0 = 1 – e–0.05 e –1/3 p95 = −300 ln(0.42 -------------------------------------------------------------------------------------------------------- 70. 0.68. Solution: D The distribution function of an exponential random variable T with parameter θ is given by F ( t ) = 1 − e − t θ .

8 ≤ y ⎤⎦ = Pr ⎢ X ≤ Y 8 = − 8 10 ⎥ 1 e ⎣ 10 ⎦ 1 1 ⎛ Y ⎞ 4 − Y 10 5 4 Therefore. the distribution function of V is given by F ( v ) = Pr [V ≤ v ] = Pr ⎡⎣10. 000 ) ⎤⎦ ln ( v ) − ln (10.04.71. 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 .04 ⎡ ⎛ v ⎞ ⎤ = 25 ⎢ ln ⎜ ⎟ − 0. 000 ⎠ ⎦ -------------------------------------------------------------------------------------------------------- 73.04 0. Solution: E We are given that R is uniform on the interval ( 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 .000 ) 1 = ∫ dr = r = 25ln ( v ) − 25ln (10. 000 ) − 1 0. Then t = y and g ( y ) = f ( t ( y ) ) dt dy = f ( y ) dtd ( y ) = 8 y −3 2 ⎛ 1 −1 2 ⎞ ⎜ y ⎟ = 4y ⎝2 ⎠ −2 -------------------------------------------------------------------------------------------------------- 72. f ( y ) = F ′ ( y ) = ⎜ ⎟ e ( ) 8 ⎝ 10 ⎠ Page 30 of 56 . 0.04 ⎥ ⎣ ⎝ 10.000 ) 1 ln ( v )−ln (10.04 0. 000e R Therefore. 000e R ≤ v ⎤⎦ = Pr ⎡⎣ R ≤ ln ( v ) − ln (10.04 0.08 ) and V = 10. Solution: E ⎡ ( ) ⎤ − (Y ) 10 10 F ( y ) = Pr [Y ≤ y ] = Pr ⎡⎣10 X 0.

Page 31 of 56 . observe that the distribution function of X is given by x 3 1 1 F ( x ) = ∫ 4 dt = − 3 | 1x = 1 − 3 . 12] . y>1 ⎝ y ⎠ while the density function of Y is given by 2 2 ⎛ 1 ⎞ ⎛ 3 ⎞ ⎛ 9 ⎞⎛ 1 ⎞ g ( y ) = G ' ( y ) = 3 ⎜1 − 3 ⎟ ⎜ 4 ⎟ = ⎜ 4 ⎟⎜ 1 − 3 ⎟ . Differentiating with respect to ⎣T ⎦ ⎣ r⎦ ⎝ 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. 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) . Then if Y denotes the largest of these three claims. y>1 ⎝ y ⎠ ⎝ y ⎠ ⎝ y ⎠⎝ y ⎠ Therefore. -------------------------------------------------------------------------------------------------------- 76. x > 1 1 t t x Next. X2. and X3 denote the three claims made that have this distribution. We are given that the pdf of X is f .74. 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 ] 3 ⎛ 1 ⎞ = ⎜1 − 3 ⎟ . Solution: A Let X and Y be the monthly profits of Company I and Company II. 4 ⎝ r ⎠ 2r -------------------------------------------------------------------------------------------------------- 75. let X1. Then ⎡10 ⎤ ⎡ 10 ⎤ ⎛ 10 ⎞ FR(r) = P[R ≤ r] = P ⎢ ≤ r ⎥ = P ⎢T ≥ ⎥ = 1 − FT ⎜ ⎟ . Solution: A First. dt 4 −1 ⎛ −10 ⎞ 5 Therefore fR(r) = ⎜ 2 ⎟= 2 . Solution: E First note R = 10/T . respectively. 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 .

= 1− ∫∫ 1 1 8 ( x + y )dxdy = 0. This evaluation is more easily performed by integrating over the unshaded region and subtracting from 1.625 48 48 -------------------------------------------------------------------------------------------------------- 78. 2 ∞ 9 ⎛ 1 ⎞ ∞ 9 ⎛ 2 1 ⎞ E [Y ] = ∫ 3 ⎜ 1 − 3 ⎟ dy = ∫ 3 ⎜ 1 − 3 + 6 ⎟ dy 1 y ⎝ y ⎠ 1 y ⎝ y y ⎠ ∞ ∞⎛ 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. 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 2 2 1 Prob.025 (in thousands) ⎣2 5 8⎦ -------------------------------------------------------------------------------------------------------- 77. Page 32 of 56 .625 Note { Pr ⎡⎣( X ≤ 1) ∪ (Y ≤ 1) ⎤⎦ = Pr ⎡⎣( X > 1) ∩ (Y > 1) ⎤⎦ c } (De Morgan's Law) 1 1 21 = 1 − Pr ⎡⎣( X > 1) ∩ (Y > 1) ⎤⎦ ∫ 8 ( x + y ) dxdy ( x + y ) 12 dy 2 2 = 1− ∫ = 1− ∫ 2 1 1 8 1 2 1 2⎡ 1 ⎡ 1 = 1− ∫ ( y + 2 ) − ( y + 1) ⎤ dy = 1− ( y + 2 ) − ( y + 1) ⎤ = 1 − ( 64 − 27 − 27 + 8 ) 2 2 3 3 2 16 1 ⎣ ⎦ 48 ⎣ ⎦ 1 48 18 30 = 1− = = 0.

282. 250 ) = 6. 250 . t ) dsdt + ∫ ∫ f ( s. ⎡⎛ 1⎞ ⎛ 1 ⎞⎤ Pr ⎢⎜ S ≤ ⎟ ∪ ⎜ T ≤ ⎟ ⎥ = ∫ ∫ f ( s. Therefore.328. the total contributions are approximately normally distributed with mean nμ = ( 2025 )( 3125 ) = 6. p − nμ = 1.282 . and so p = nμ + 1. Solution: E The domain of s and t is pictured below.328. the 90th percentile for a standard normal random variable is 1. Solution: C By the central limit theorem.125 and standard deviation σ n = 250 2025 = 11.41 54 1 54 1 54 54 27 -------------------------------------------------------------------------------------------------------- 79. 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. From the tables. Letting p be the 90th percentile for total contributions. t ) dsdt 1/ 2 1 1 1/ 2 ⎣⎝ 2⎠ ⎝ 2 ⎠ ⎦ 0 1/ 2 0 0 (where the first integral covers A and the second integral covers B). σ n Page 33 of 56 .125 + (1.342.282 )(11. -------------------------------------------------------------------------------------------------------- 80.548 . Pr ⎡⎣( X < 1) ∪ (Y < 1) ⎤⎦ 3 x+ y 3 x + 2 xy 2 1 3 dy = 1 − ∫ ( 9 + 6 y − 1 − 2 y ) dy 3 3 = 1− ∫ ∫ dx dy = 1 − ∫ 1 1 27 1 54 1 54 1 3 8 + 4 y ) dy = 1 − ( 8 y + 2 y 2 ) = 1 − ( 24 + 18 − 8 − 2 ) = 1 − 1 3 1 1 32 11 = 1− ∫ ( = = 0.282 σ n = 6.

8413 – 1 = 0.6) = 1 – 0. Solution: B Let X1. we may conclude that S has an approximate normal distribution with E[S] = Var[S] = (2)(1250) = 2500 . and let X = (X1 + . .400 and standard deviation (5000) = 1000 . 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. We are 25 given that each Xi (i = 1. X1250 be the number of claims filed by each of the 1250 policyholders. It follows that E[Xi] = Var[Xi] = 2 . Therefore P[2450 < S < 2600] = ⎡ 2450 − 2500 S − 2500 2600 − 2500 ⎤ ⎡ S − 2500 ⎤ P⎢ < < ⎥ = P ⎢ −1 < < 2⎥ ⎣ 2500 2500 2500 ⎦ ⎣ 50 ⎦ ⎡ S − 2500 ⎤ ⎡ S − 2500 ⎤ = P⎢ < 2⎥ − P ⎢ < −1⎥ ⎣ 50 ⎦ ⎣ 50 ⎦ S − 2500 Then using the normal approximation with Z = . X25 denote the 25 collision claims. 400 ⎤ = P⎢ > ⎥ = P⎢ > 0. -------------------------------------------------------------------------------------------------------- 83. . .000] 25 ⎡ X − 19.8186 .9773 + 0. +X25) . Solution: B Let X1. . . Since these random variables are independent and normally distributed with mean 3 and variance 1. . 000 − 19. . we have P[2450 < S < 2600] 50 ≈ P[Z < 2] – P[Z > 1] = P[Z < 2] + P[Z < 1] – 1 ≈ 0. 400 ⎤ ⎡ X − 19. We are given that each Xi follows a Poisson distribution with mean 2 . We conclude that P[ X > 20.400 and standard deviation 5000 . Xn denote the life spans of the n light bulbs purchased.2743 . 400 20. . 25) follows a normal distribution with mean 19.7257 ⎣ 1000 1000 ⎦ ⎣ 1000 ⎦ = 0. . Now we are interested in the random variable S = X1 + . -------------------------------------------------------------------------------------------------------- 82. . .6 ⎥ = 1 − Φ(0.-------------------------------------------------------------------------------------------------------- 81.9772 ≤ Pr [ S > 40] = Pr ⎢ > ⎥ ⎣ n n ⎦ This implies that n should satisfy the following inequality: Page 34 of 56 . Solution: C 1 Let X1. . . . . As a result X also follows a normal distribution with mean 1 19. . Assuming that the random variables are independent. + X1250 .….

8413 where Z is a standard normal random variable. Page 35 of 56 . 40 − 3n −2 ≥ n To find such an n. 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 Therefore. ⎡ T − 7000 7100 − 7000 ⎤ Pr [T < 7100] = Pr ⎢ < ⎥⎦ ⎣ 100 100 = Pr [ Z < 1] = 0. let’s solve the corresponding equation for n: 40 − 3n −2 = n −2 n = 40 − 3n 3n − 2 n − 40 = 0 (3 n + 10 )( ) n −4 =0 n =4 n = 16 -------------------------------------------------------------------------------------------------------- 84. Y ] = 50 + 30 + 20 = 100 for a randomly selected person.

.4 )( 0.000..3 − ( 0. E ⎡⎣ X i ⎤⎦ = ( 0 ) ( 0. Var[X] = 1. + X 100 is approximately normally distributed with mean E [ S ] = E [ X 1 ] + .000 Moreover..000 and standard deviation = 10.000] = 1 – P[S ≤ 110.81 2 2 2 Since X 1 .99 Page 36 of 56 .7 ) = 70 and variance Var [ S ] = Var [ X 1 ] + .3) = 1.100 ..75 ) = 0.841 ≈ 0... + Var [ X 100 ] = 100 ( 0..3 . + E [ X 100 ] = 100 ( 0. 000 ⎦ – 0.. Solution: B Denote the policy premium by P .. X 100 denote the number of pensions that will be provided to each new recruit.000.4 )( 0.-------------------------------------------------------------------------------------------------------- 85...6 ) + (1) ( 0.. Since x is exponential with parameter 1000.100 .. -------------------------------------------------------------------------------------------------------- 86.25 ) = 0.1) + ( 2 ) ( 0. Therefore. the Central Limit Theorem then implies that S = X 1 + . 000 − 100. Now under the assumptions given. Now if 100 policies are sold. Var[ X ] = 1000 and P = 100 + E[X] = 1.5 − 70 ⎤ Pr [ S ≤ 90. It follows from the Central Limit Theorem that S is approximately normally distributed with mean 100. Therefore. it follows from what we are given that E[X] = 1000.7 ) = 0. ⎡ S − 70 90. ⎧0 with probability 1 − 0.000. X 100 are assumed by the consulting actuary to be independent..7 .000 . 000 ⎤ P[S ≥ 110.100) = 110. and 2 2 2 2 Var [ X i ] = E ⎡⎣ X i ⎤⎦ − { E [ X i ]} = 1.28] = 0.1 ⎪ ⎩2 with probability ( 0.6 ⎪ X i = ⎨1 with probability ( 0..3 for i = 1. and assume the claims of each policy are independent of the others then E[S] = 100 E[X] = (100)(1000) and Var[S] = 100 Var[X] = (100)(1.4 = 0. then Total Premium Collected = 100(1.. E [ X i ] = ( 0 )( 0.1) + ( 2 )( 0.. ⎡ 110.81) = 81 Consequently.5] = Pr ⎢ ≤ ⎥⎦ ⎣ 9 9 = Pr [ Z ≤ 2.6 ) + (1)( 0.159 ..3) = 0. if we denote total claims by S. Solution: E Let X 1 .000) .000] = 1 – P ⎢ Z ≤ ⎥ = 1 – P[Z ≤ 1] = 1 ⎣ 10.

2 ≤ Z ≤ 1.77 .2] – P[Z ≤ – ⎣ 4 4⎦ ⎣ 0. has a 1.5)3 σx2 = Var[X] = E[X2] = ∫ 5 −2.5 < x < 2. Solution: D Let X denote the difference between true and reported age.5 = 15 =2.2] = P[Z ≤ 1.-------------------------------------------------------------------------------------------------------- 87. X has pdf f(x) = 1/5. ⎡ 1 1⎤ ⎡ −0. y > 0 Therefore.5 2(2.2] – 1 + P[Z ≤ 1. Solution: C Let X denote the waiting time for a first claim from a good driver.5) .2.5 dx = 15 −2. and let Y denote the waiting time for a first claim from a bad driver. -------------------------------------------------------------------------------------------------------- 88.443 distribution that is approximately normal with mean 0 and standard deviation = 48 0.2083 ⎥⎦ 1. Therefore. It follows that μ x = E[X] = 0 2.25 0.5.2] – 1 = 2(0.5 . The problem statement implies that the respective distribution functions for X and Y are F ( x ) = 1 − e− x / 6 . We are given X is uniformly distributed on (−2.8849) – 1 = 0. the difference between the means of the true and rounded ages.2] = P[Z ≤ 1.443 Now X 48 . −2.25 ⎤ P ⎢ − ≤ X 48 ≤ ⎥ = P ⎢ ≤Z≤ = P[−1.2083 0. x > 0 and G ( y ) = 1 − e− y / 3 . That is.083 σx =1.5 x2 x3 2.2083 .2] = 2P[Z ≤ 1. 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 Page 37 of 56 .

30) (30. -------------------------------------------------------------------------------------------------------- 91. Solution: B ⎧ 6 ⎪ (50 − x − y ) for 0 < x < 50 − y < 50 We are given that f ( x. 000 ⎪0 ⎩ otherwise and we want to determine P[X > 20 ∩ Y > 20] . y ) = ⎨125. Then the joint pdf of T1 and T2 is ⎛1 ⎞⎛ 1 ⎞ 1 f (t1 . t2 ) = ⎜ e − t1 / 2 ⎟ ⎜ e− t2 / 3 ⎟ = e− t1 / 2 e− t2 / 3 . 0 < t2 < ∞ and we need to find ⎝2 ⎠⎝ 3 ⎠ 6 ∞ t1 ∞ 1 −t / 2 −t / 3 ⎡ 1 − t / 2 − t / 3 ⎤ t1 P[T2 < T1] = ∫0 ∫0 6e 1 e 2 dt2 dt1 = ∫0 ⎢⎣ − 2 e 1 e 2 ⎥⎦ 0 dt1 ∞ ∞ ∞ ⎡ 1 − t1 / 2 1 − t1 / 2 − t1 / 3 ⎤ ⎡ 1 − t1 / 2 1 −5t1 / 6 ⎤ ⎡ − t1 / 2 3 −5t1 / 6 ⎤ 3 2 = ∫⎢ e − e e ⎥ dt1 = ∫ ⎢ e − e ⎥ dt1 = ⎢ −e + e ⎥ = 1− = 0 ⎣ 2 2 ⎦ 0 ⎣ 2 2 ⎦ ⎣ 5 ⎦0 5 5 = 0. To this end. Solution: D We want to find P[X + Y > 1] . consider the following diagram: y 50 x>20 y>20 (20. 20 -------------------------------------------------------------------------------------------------------- 90.4 . note that P[X + Y > 1] ⎡ 2x + 2 − y ⎤ 2 ⎡1 1 ⎤ 1 2 1 1 = ∫∫⎢ ⎥dydx = ∫ ⎢ xy + y − y 2 ⎥ dx 0 1− x ⎣ ⎦ 0 ⎣ 4 2 2 8 ⎦ 1− x ⎡ 2⎤ ⎡ 1 ⎤ 1 1 1 1 1 1 1 1 1 ∫0 ⎢⎣ x + 1 − 2 − 2 x(1 − x) − 2 (1 − x) + 8 (1 − x) ⎥⎦ dx = ∫ ⎢⎣ x + 2 x + − x + x 2 ⎥ dx 2 = 0 8 4 8 ⎦ 1 ⎡5 1⎤ ⎡5 1 ⎤ 1 3 3 5 3 1 17 ∫ ⎢⎣ 8 x + x + ⎥ dx = ⎢ x 3 + x 2 + x ⎥ = + + = 2 = 0 4 8⎦ ⎣ 24 8 8 ⎦ 0 24 8 8 24 Page 38 of 56 . 20) x 50 30 50 − x 6 125. 0 < t1 < ∞ . Solution: C Let T1 be the time until the next Basic Policy claim. and let T2 be the time until the next Deluxe policy claim. 89. 000 20∫ ∫ We conclude that P[X > 20 ∩ Y > 20] = (50 − x − y ) dy dx . In order to determine integration limits.

9 ) = 0. 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: 1 2002 − 2 ⋅ (180 ) 2 Shaded Region Area 2 Pr ⎡⎣ X − Y < 20 ⎤⎦ = = ( 2200 − 2000 ) 2 2002 1802 = 1− = 1 − ( 0.92.19 ⎝ 200 ⎠ Page 39 of 56 .19 2 2 200 More formally (still using symmetry) Pr ⎡⎣ X − Y < 20 ⎤⎦ = 1 − Pr ⎡⎣ X − Y ≥ 20 ⎤⎦ = 1 − 2 Pr [ X − Y ≥ 20] 2200 x − 20 1 2200 1 = 1 − 2∫ ∫ 2 dydx = 1 − 2 ∫ x − 20 y 2000 dx 2020 2000 200 2020 200 2 2 1 2 ∫ 2020 ( x − 20 − 2000 ) dx = 1 − 2 ( x − 2020 ) 2200 = 1− 2 2200 2020 200 200 2 ⎛ 180 ⎞ = 1− ⎜ ⎟ = 0. Solution: B Let X and Y denote the two bids.

since X and Y are uniform random variables. That is. However. t2 ) denote the joint density function of T1 and T2 . it is simpler to determine the portion of the 10 x 10 square that is shaded in the graph above. 2 < Y < 7 ) + Pr (1 < X < 6.-------------------------------------------------------------------------------------------------------- 93. 0 < Y < 2 ) + Pr ( 0 < X < 1.295 100 100 100 100 100 100 -------------------------------------------------------------------------------------------------------- 94. respectively. 0 < y < 10 100 We could integrate f over the shaded region in order to determine the desired probability. 2 < Y < 8 − X ) = ( 6 )( 2 ) + (1)( 5 ) + (1 2 )( 5)( 5 ) = 12 + 5 12. Solution: C Define X and Y to be loss amounts covered by the policies having deductibles of 1 and 2. Solution: C Let f ( t1 . Pr ( Total Benefit Paid Does not Exceed 5) = Pr ( 0 < X < 6. 0 < x < 10 . y ) = . The domain of f is pictured below: Now the area of this domain is given by 1 A = 62 − ( 6 − 4 ) = 36 − 2 = 34 2 2 Page 40 of 56 . 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.5 + = 0.

7 ⎩ 17 34 ⎣ 3 ⎦⎭ -------------------------------------------------------------------------------------------------------- 95. f ( t1 .98 ) = 0.65 . 0 < t2 < 6 . he may be required to refund 100 to one passenger if all 21 ticket holders show up.02 ) = ( 0. ⎧1 ⎪ . However. t2 ) = E ⎡⎣ et1W +t2 Z ⎤⎦ = E ⎡⎣e 1 ( ) 2 ( ) ⎤⎦ = E ⎡⎣e( 1 2 ) e( 1 2 ) ⎤⎦ t X +Y + t Y − X t −t X t +t Y 1 ( t1 −t2 )2 1 ( t1 + t2 )2 1 (t 1 − 2 t1t2 + t2 2 2 ) 12 (t 1 + 2 t1t2 + t2 2 2 ) = E ⎡⎣e( 1 2 ) ⎤⎦ E ⎡⎣ e( 1 2 ) ⎤⎦ = e 2 t −t X t +t Y = et1 +t2 2 2 e2 = e2 e -------------------------------------------------------------------------------------------------------- 96. Solution: E Observe that the bus driver collect 21x50 = 1050 for the 21 tickets he sells. Page 41 of 56 . 0 < t1 < 6 . Since passengers show up or do not show up independently of one another. Therefore.65 ) = 985 . the probability that all 21 passengers will show up is (1 − 0. the tour 21 21 operator’s expected revenue is 1050 − (100 )( 0. t2 ) = ⎨ 34 ⎪⎩ 0 elsewhere and E [T1 + T2 ] = E [T1 ] + E [T2 ] = 2 E [T1 ] (due to symmetry) ⎧ 4 6 1 6 10 −t1 1 ⎫ ⎧ 4 ⎡t ⎤ 6 ⎡t ⎤ ⎫ = 2 ⎨ ∫ t1 ∫ dt2 dt1 + ∫ t1 ∫ dt2 dt1 ⎬ = 2 ⎨ ∫ t1 ⎢ 2 06 ⎥ dt1 + ∫ t1 ⎢ 2 10 − t1 0 ⎥ dt1 ⎬ ⎩ 0 0 34 4 0 34 ⎭ ⎩ 0 ⎣ 34 ⎦ 4 ⎣ 34 ⎦ ⎭ ⎧ 4 3t1 ⎫ ⎧ 3t 2 1 ⎛ 2 1 3⎞ 6⎫ (10t1 − t12 ) dt1 ⎬ = 2 ⎨ 1 6 1 = 2 ⎨∫ dt1 + ∫ 4 0 + ⎜ 5t1 − t1 ⎟ 4 ⎬ ⎩ 0 17 4 34 ⎭ ⎩ 34 34 ⎝ 3 ⎠ ⎭ ⎧ 24 1 ⎡ 64 ⎤ ⎫ = 2 ⎨ + ⎢180 − 72 − 80 + ⎥ ⎬ = 5. t1 + t2 < 10 Consequently. Solution: E M ( t1 .

Since P[Y = 1] = P[X1 = 1 ∩ X2 = 1 ∩ X3 = 1] = P[X1 = 1] P[X2 = 1] P[X3 = 1] = (2/3)3 = 8/27 . ⎧ 19 ⎪ 27 for y = 0 ⎪ ⎪8 We conclude that g ( y ) = ⎨ for y = 1 ⎪ 27 ⎪0 otherwise ⎪ ⎩ 19 8 t and M(t) = E ⎡⎣e yt ⎤⎦ = + e 27 27 Page 42 of 56 . E[T1 + T2 ] = ∫ ∫ (t1 + t2 ) 2 dt1dt2 = 2 2 2 0 0 L ⎪⎧ ⎡ t1 2 ⎤ ⎪⎫ 2 ⎪⎧ ⎛ t2 3⎞ ⎪⎫ L 3 t2 L 3 2 ⎨ ∫ ⎢ + t2 t1 ⎥ dt1 ⎬ = 2 ⎨ ∫ ⎜ + t2 ⎟ dt2 ⎬ L2⎪⎩ 0 ⎣ 3 ⎦0 ⎪⎭ L ⎩⎪ 0 ⎝ 3 ⎠ ⎭⎪ 2 ⎡t ⎤ L 4 L 2 4 3 2 = 2 ∫ t2 dt2 = 2 ⎢ 2 ⎥ = L2 L 03 L ⎣ 3 ⎦0 3 t2 (L. 0 ≤ t1 ≤ t2 ≤ L . t2) = 2/L2. Y = 0 . Solution: C We are given f(t1. Solution: A Let g(y) be the probability function for Y = X1X2X3 . L) t1 -------------------------------------------------------------------------------------------------------- 98. Otherwise.97. L t2 2 2 Therefore. Note that Y = 1 if and only if X1 = X2 = X3 = 1 .

1Y ) + 100 ⎤⎦ = Var [ X + 1.1Y ] = Var X + Var ⎡⎣(1.300. 2 -------------------------------------------------------------------------------------------------------- 100. 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. 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 . -------------------------------------------------------------------------------------------------------- 102.58 . First we observe 17.1Y ) = Var X + (1. Therefore. 99. Now the variance of an exponential random variable with mean β is β 2 .1) Y ⎤⎦ + 2 Cov ( X .100 + 2200 = 19. -------------------------------------------------------------------------------------------------------- 101. 000 + 2 Cov ( X . Y ) = 1000.1) Var Y + 2 (1. Solution: C We use the relationships Var ( aX + b ) = a 2 Var ( X ) . 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 .1. 000 = Var ( X + Y ) = 5000 + 10.1Y ⎤⎦ = Var ⎡⎣( X + 1. and so Cov ( X . we see Var [ X+Y ] = Var [ X ] + Var [ Y ] = 100 + 100 = 200 Page 43 of 56 . Var [ X ] = Var [Y ] = 102 = 100 Then assuming that X and Y are independent. and Var ( X + Y ) = Var ( X ) + Var (Y ) + 2 Cov ( X . Y ) . Cov ( aX . Y ) = 5000 + 12. We want to find Var ⎡⎣( X + 100 ) + 1. bY ) = ab Cov ( X . Y ) . Solution: E Let X and Y denote the times that the two backup generators can operate.1) Cov ( X .

f(x.5 )(1 − e ) −3 2.103. Page 44 of 56 . X 2 . X 3 ) .4 * = 1 − (1 − e −3 )(1 − e −2 ) (1 − e ) −5 4 = 0.y) = g(x)h(x) In other words. Cov[X. respectively. Y ] = E [ XY ] − E [ X ] E [Y ] = − ⎜ ⎟ ⎜ ⎟ = − = 0 3 ⎝ 3 ⎠⎝ 2 ⎠ 3 3 (Alternative Solution) Define g(x) = kx and h(y) = 1 . Solution: B Let us first determine k: 1 1 11 2 1 1k k 1= ∫ ∫ kxdxdy = ∫ kx | 0 dy = ∫ dy = 0 0 0 2 0 2 2 k =2 Then 1 1 2 31 2 E [ X ] = ∫ ∫ 2 x 2 dydx = ∫ 2 x 2 dx = 1 x |0= 0 0 0 3 3 1 1 1 2 1 1 E [Y ] = ∫ ∫ y 2 x dxdy = ∫ ydy = 1 y |0= 0 0 0 2 2 2 3 1 12 E [ XY ] = ∫ 1 1 1 0 ∫ 0 2x 2 ydxdy = ∫ 0 3 x y | 0 dy = ∫ ydy 0 3 2 2 1 2 1 = y |0 = = 6 6 3 1 ⎛ 2 ⎞⎛ 1 ⎞ 1 1 Cov [ X .414 * Uses that if X has an exponential distribution with mean μ ∞ e − t μ dt = 1 − ( −e− t μ ) ∞x = 1 − e− x μ 1 Pr ( X ≤ x ) = 1 − Pr ( X ≥ x ) = 1 − ∫ x μ -------------------------------------------------------------------------------------------------------- 104. Solution: E Let X 1 . and theft. X 2 . It follows that X and Y are independent. and X 3 denote annual loss due to storm. Then f(x. Y] = 0 . In addition. Then 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.y) can be written as the product of a function of x alone and a function of y alone. Therefore. let Y = Max ( X 1 . fire.

Page 45 of 56 . 105. 2x 1 dx = ∫ x 2 ( 4 x 2 − x 2 ) dx = ∫ 4 x 4 dx = x5 = 8 2 14 4 4 4 E(X ) = ∫ 1 2x 1 1 0 ∫ x 3 x y dy dx = ∫ x 2 y 2 0 3 x 0 3 0 5 0 5 2x 1 dy dx = ∫ x ( 8 x3 − x3 ) dx = ∫ 8 2 18 8 1 56 56 5 56 E (Y ) = ∫ 1 2x 1 0 ∫ x 3 xy dy dx = ∫ xy 3 0 9 x 0 9 0 9 x 4 dx = x = 45 0 45 2x x ( 8 x3 − x3 ) dx = ∫ 8 2 2 18 8 2 1 56 56 28 E ( XY ) = ∫ 1 2x 1 0 ∫ x 3 x y dy dx = ∫ x 2 y 3 0 9 x dx = ∫ 0 9 0 9 x5 dx = = 54 27 28 ⎛ 56 ⎞⎛ 4 ⎞ Cov ( X . 0 < x < 12 . Solution: A The calculation requires integrating over the indicated region.04 27 ⎝ 45 ⎠⎝ 5 ⎠ -------------------------------------------------------------------------------------------------------- 106.Y) = E[XY] – E[X]E[Y] = 24 − (3)(6) = 24 – 18 = 6 .y) = f2(y|x) f1(x) = (1/x)(1/12). Solution: C The joint pdf of X and Y is f(x. 12 x 12 12 1 y x x x 2 12 E[X] = ∫ ∫ x ⋅ dydx = ∫ dx = ∫ dx = =6 0 0 12 x 0 12 0 0 12 24 0 ⎡ y2 ⎤ 12 x 12 12 x y x x 2 12 144 E[Y] = ∫ ∫ dydx = ∫ ⎢ dx = ∫ dx = = 24 x ⎥⎦ 0 =3 0 ⎣ 0 0 12 x 0 24 48 0 48 ⎡ y2 ⎤ 12 x 12 x12 2 y x x3 12 (12)3 E[XY] = ∫0 ∫0 12 dydx = ∫0 ⎢⎣ 24 ⎥⎦ dx = ∫0 24 72 0 dx = = 72 = 24 0 Cov(X. Therefore. 0 < y < x. Y ) = E ( XY ) − E ( X ) E (Y ) = − ⎜ ⎟⎜ ⎟ = 0.

X + 1.4 + 2.2VarY Var X = E ( X 2 ) − ( E ( X ) ) = 27.2 (1. Y ) + 1.4 ) = 1.2Y ) = E ⎡⎣( X + Y )( X + 1.6 1 2 Cov ( C1 .2 E [ XY ] + 1.4 ) = 8. we need to calculate E [ XY ] first.4 − 7 2 = 2.2 ( 51.8 -------------------------------------------------------------------------------------------------------- 107.4 2 Var Y = E (Y 2 ) − ( E (Y ) ) = 51.4 + 2. C2 ) = 2.4 ) − (12 )(13. Y ) = 1 2 ( Var ( X + Y ) − Var X − Var Y ) = ( 8 − 2. X ) + Cov (Y .2Cov ( X .2 E [Y ]) = E ⎡⎣ X 2 ⎤⎦ + 2. Alternate solution: We are given the following information: C1 = X + Y C2 = X + 1. To this end.4 E [Y ] = 7 E ⎡⎣Y 2 ⎤⎦ = 51.4 Var [ X + Y ] = 8 Now we want to calculate Cov ( C1 . Solution: A Cov ( C1 .4 − 2.72 Therefore.2Y 2 ⎤⎦ − ( E [ X ] + E [Y ]) ( E [ X ] + 1.6 ) + 1.4 − 52 = 2.2 E [ XY ] − 71.107. C2 ) = Cov ( X + Y .2Y ) = Cov ( X .2 Cov ( X . X + 1.2Y ) ⎤⎦ − E [ X + Y ] E [ X + 1.2Y ] = E ⎡⎣ X 2 + 2. Y ) Cov ( X .2VarY = Var X + 2.1.4 ) = 2. Y ) + 1.2Y E[X ] = 5 E ⎡⎣ X 2 ⎤⎦ = 27.2Y ) + Cov ( Y.2 XY + 1.2 E ⎡⎣Y 2 ⎤⎦ − ( 5 + 7 ) ( 5 + (1.2Y ) = Var X + Cov ( X . X ) + Cov ( X .2 ( 2.4 2 Var ( X + Y ) = Var X + Var Y + 2 Cov ( X .2 E [ XY ] + 1.1. Y ) + 1. C2 ) = Cov ( X + Y . observe Page 46 of 56 .2 ) 7 ) = 27.

Solution: A The joint density of T1 and T2 is given by f ( t1 .2 ( 36. x > 0 It follows that the density of X is given by d ⎡ ⎤ 1 1 − x − x g ( x) = ⎢1 − 2 e 2 + e −x ⎥ = e 2 − e− x . Cov ( C1. t2 > 0 Therefore.6 ) − 71. x > 0 dx ⎣ ⎦ Page 47 of 56 .C2 ) = 2.2 ) 2 = 36.6 Finally.72 = 8.4 − 144 = 2 E [ XY ] − 65. 8 = Var [ X + Y ] = E ⎡( X + Y ) ⎤ − ( E [ X + Y ]) 2 2 ⎣ ⎦ = E ⎡⎣ X 2 + 2 XY + Y 2 ⎤⎦ − ( E [ X ] + E [Y ]) 2 = E ⎡⎣ X 2 ⎤⎦ + 2 E [ XY ] + E ⎡⎣Y 2 ⎤⎦ − ( 5 + 7 ) 2 = 27.8 -------------------------------------------------------------------------------------------------------- 108. t2 ) = e − t1 e − t2 .4 + 2 E [ XY ] + 51.2 E [ XY ] = ( 8 + 65. t1 > 0 . Pr [ X ≤ x ] = Pr [ 2T1 + T2 ≤ x ] x 1 ( x − t2 ) x ⎡ 1 ( x − t2 ) ⎤ =∫ ∫ 2 e − t1 e −t2 dt1dt2 = ∫ e − t2 ⎢ −e− t1 2 ⎥ dt2 0 0 0 ⎢⎣ 0 ⎥⎦ x ⎡ − x + t2 ⎤ 1 1 x⎛ − x − t2 ⎞ 1 1 = ∫ e − t2 ⎢1 − e 2 2 ⎥ dt2 = ∫ ⎜ e − t2 − e 2 e 2 ⎟dt2 ⎣ ⎦ ⎝ ⎠ 0 0 ⎡ − x − t2 ⎤ 1 1 − 1 1 x − x − 1 x = ⎢ − e − t 2 + 2e 2 e 2 ⎥ x 0 = − e − x + 2e 2 e 2 + 1 − 2e 2 ⎣ ⎦ 1 1 − x − x = 1 − e − x + 2e − x − 2 e 2 = 1 − 2 e 2 + e − x .

and F(x) be the distribution function of X. f(x) be the density function of X. 0< y< . 0 < v < ∞ ⎝2 ⎠ 2 and ⎡u ⎤ F ( x ) = Pr [ X ≤ x ] = Pr ⎢ ≤ x ⎥ = Pr [U ≤ Vx ] ⎣v ⎦ ∞ vx ∞ vx 1 = ∫ ∫ g ( u. Solution: B Let u be annual claims. v )dudv = ∫ ∫ e −u e− v / 2 dudv 0 0 0 0 2 ∞ 1 ∞⎛ 1 1 ⎞ = ∫ − e − u e − v / 2 | 0vx dv = ∫ ⎜ − e− vx e− v / 2 + e− v / 2 ⎟ dv 0 2 0 ⎝ 2 2 ⎠ ∞⎛ 1 − v x +1/ 2) 1 − v / 2 ⎞ = ∫ ⎜− e ( + e ⎟ dv 0 ⎝ 2 2 ⎠ ∞ ⎡ 1 ⎤ 1 e ( − v x +1/ 2 ) =⎢ − e− v / 2 ⎥ = − +1 ⎣ 2x + 1 ⎦0 2x + 1 2 Finally. y ) = y . 0 < u < ∞ . f ( x ) = F ' ( x ) = ( 2 x + 1) 2 -------------------------------------------------------------------------------------------------------- 110. v ) = ( e−u ) ⎜ e− v / 2 ⎟ = e−u e− v / 2 .109. v) be the joint density function of U and V. ⎝ 3⎠ f x (1 3) 3 ⎛1⎞ 23 16 f x ⎜ ⎟ = ∫ 24 (1 3) y dy = ∫ 8 y dy = 4 y 2 = 23 2 3 ⎝ 3⎠ 0 0 0 9 ⎛ 1⎞ 9 9 2 It follows that f ⎜ y x = ⎟ = f (1 3. Solution: C Note that the conditional density function ⎛ 1 ⎞ f (1 3. Pr ⎡⎣Y < X X = 1 3⎤⎦ = ∫ y dy = y 2 = 0 2 4 4 0 Page 48 of 56 . 0 < y < ⎝ 3 ⎠ 16 2 3 13 139 9 1 Consequently. ⎛1 ⎞ 1 g ( u. Then since U and V are independent. g(u. v be annual premiums. y ) 2 f ⎜y x= ⎟= .

x Now fx(x) = ∫ (2 x + 2 y )dy = ⎡⎣ 2 xy + y 2 ⎤⎦ x = 2x2 + x2 = 3x2.y) = 2(x+y).4167 . 0 < y < x < 1 .96 + 0. 111.97 Pr ⎡⎣ H ∩ W c ⎤⎦ 0. y ) = y ( ) = y −3 − 4 −1 2 −1 4 ( 2 − 1) 2 ∞ ∞ 1 1 1 f x ( 2 ) = ∫ y −3 dy = − y −2 = 1 2 4 1 4 3 1 −3 ∫ 2 y dy 3 1 8 Finally.05 1 1 0.97 Page 49 of 56 .97 and Pr [W ∩ H ] 0.10 3 ⎣ 0. Solution: D We are given that the joint pdf of X and Y is f(x.1 0.05 2 100 5 ∫ 3 [10 + 100 y ] dy = ⎢⎣ 3 y + 3 y = + = 2 P[Y < 0. 0 0 3 12 12 -------------------------------------------------------------------------------------------------------- 113. 0 < y < x f x ( x) 3x 2 3⎝ x x ⎠ 2⎡ 1 y ⎤ 2 f(y|x = 0. y ) Pr ⎡⎣1 < Y < 3 X = 2 ⎤⎦ = ∫ dy 1 f x ( 2) 2 1 f ( 2. Solution: E 3 f ( 2.05|X = 0.10] = ⎥⎦ = 0.01 = 0.96 Pr [W | H ] = = = 0.10) = ⎢ + = [10 + 100 y ] .0103 Pr [ H ] 0. Pr ⎡⎣1 < Y < 3 X = 2 ⎤⎦ = = − y −2 = 1 − = 1 1 1 9 9 4 -------------------------------------------------------------------------------------------------------- 112. 0 < x < 1 0 0 f ( x.01 ⎥⎦ 3 ⎡ 20 ⎤ 0. 0 < y < 0.9897 Pr [ 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 ⎤⎦ = 0.01 Pr ⎡⎣W c | H ⎤⎦ = = = 0. y ) 2( x + y ) 2 ⎛ 1 y ⎞ so f(y|x) = = = ⎜ + 2 ⎟.

125 = 0. 000 ( 0. 0< x<1 x Consequently. f ( x.714 – (0. Then x +1 f1 ( x ) = ∫ 2 xdy = 2 xy | xx +1 = 2 x ( x + 1 − x ) = 2 x .714 E(Y2⏐X = 1) = (0)2 P(Y = 0⏐X = 1) + (1)2 P(Y = 1⏐X = 1) = 0.286 = 0. E(Y⏐X = 1) = (0) P(Y = 0⏐X = 1) + (1) P(Y = 1⏐X = 1) = (1)(0.286 P(Y = 1⏐X=1) = 1 – P(Y = 0 ⏐ X = 1) = 1 – 0. y ) ⎧1 if: x < y < x + 1 f ( y| x ) = =⎨ f1 ( x ) ⎩0 otherwise x +1 1 1 1 1 1 1 1 E [Y | X ] = ∫ ydy = y 2 | xx +1 = ( x + 1) − x 2 = x 2 + x + − x 2 = x + 2 x 2 2 2 2 2 2 2 x +1 1 1 1 E ⎡⎣Y 2 | X ⎤⎦ = ∫ y 2 dy = y 3 | xx +1 = ( x + 1) − x3 3 x 3 3 3 1 1 1 1 = x3 + x 2 + x + − x3 = x 2 + x + 3 3 3 3 2 1 ⎛ 1⎞ Var [Y | X ] = E ⎡⎣Y | X ⎤⎦ − { E [Y | X ]} = x + x + − ⎜ x + ⎟ 2 2 2 3 ⎝ 2⎠ 1 1 1 = x2 + x + − x2 − x − = 3 4 12 Page 50 of 56 .05 P(Y = 0⏐X = 1) = = = P( X = 1) P( X = 1. Y = 1) 0.714 Var(Y⏐X = 1) = E(Y2⏐X = 1) – [E(Y⏐X = 1)]2 = 0. Y = 0) 0.20 -------------------------------------------------------------------------------------------------------- 115. Y = 0) + P ( X = 1.714)2 = 0.714 Therefore. It follows that { } E [ P ] = E [1000 − B ] = 1000 − E [ B ] = 1000 − ( 0 ) Pr [W | H ] + (10. 000 ) Pr ⎡⎣W c | H ⎤⎦ = 1000 − 10.05 + 0. Solution: A Let f1(x) denote the marginal density function of X.714) = 0. Solution: C Note that P( X = 1. Y = 0) P( X = 1.0103) = 1000 − 103 = 897 -------------------------------------------------------------------------------------------------------- 114.

2 1 = 6∫ (1 − x ) dx = − (1 − x ) | 0.06) + (2)(0.76 and Var[NQ|NP = 0] = E[NQ2|NP = 0] – {E[NQ|NP = 0]}2 = 1.488 2 3 3 0 2 -------------------------------------------------------------------------------------------------------- 118. Solution: E The shaded portion of the graph below shows the region over which f ( x.116.02] = 1.06 + 0.2 ⎡ 1 2⎤ = 6∫ ⎢1 − x − x (1 − x ) − (1 − x ) ⎥ dx = 6 ∫ ⎢(1 − x ) − (1 − x ) ⎥ dx 2 0 ⎣ 2 ⎦ 0 ⎣ 2 ⎦ 0.2 ∫ 0. -------------------------------------------------------------------------------------------------------- 117.05 + 0.12 + 0.2 0 0 0 ⎢⎣ y − xy − 2 y ⎥⎦ dx 0 0.12) + (1)(0. Solution: C The domain of X and Y is pictured below. The shaded region is the portion of the domain over which X<0.05 + 0. Then E[NQ|NP = 0] = [(0)(0.06 + 0.12 + 0.02] = 0.05) + 3(0.2] = ∫ 6 ⎡⎣1 − ( x + y ) ⎤⎦dydx = 6 ∫ 0. y ) is nonzero: We can infer from the graph that the marginal density function of Y is given by ( ) y g ( y ) = ∫ 15 y dx = 15 xy y − y = 15 y 3 2 (1 − y1 2 ) . 0 < y < 1 y = 15 y y y Page 51 of 56 .12) + (1)2(0.02)] / [0.05) + (3)2(0.2 .76 – (0.06) + (2)2(0.02)] / [0.2 0 = − ( 0.88)2 = 0.88 E[NQ2|NP = 0] = [(0)2(0.9856 .2 ⎡ 1 2⎤ 0. respectively.8 ) + 1 = 0. Solution: D Denote the number of tornadoes in counties P and Q by NP and NQ. Now observe 1− x 1− x ⎡ 1 2⎤ Pr [ X < 0.

x < y < x + 1 ⎧1 if 0 < x < 1 . ⎧⎪15 y 3 2 (1 − y )1 2 . 1 1 Pr [Y > 0. We are told that the marginal density function of X is f x ( x ) = 1 . x < y < x + 1 It follows that f ( x.5] = 1 − ∫ 2 ∫ 2 dydx 0 x 1 ⎛1 ⎞ 1 ⎡1 1 ⎤ 1 1 1 7 = 1− ∫ dx = 1 − ∫ 1 2 y x 2 ⎜ − x ⎟ dx = 1 − ⎢ x − x 2 ⎥ 0 2 = 1 − + = 2 0 0 ⎝2 ⎠ ⎣2 2 ⎦ 4 8 8 [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. 0 < x < 1 while f y x ( y x ) = 1 .] Page 52 of 56 . y ) of X and Y . y ) = f x ( x ) f y x ( y x ) = ⎨ ⎩0 otherwise Therefore. Solution: D The diagram below illustrates the domain of the joint density f ( x.5] = 1 − Pr [Y ≤ 0. g ( y ) = ⎨ ⎪⎩0 otherwise -------------------------------------------------------------------------------------------------------- 119. 0 < y < 1 or more precisely.

Solution: C The marginal density of X is given by 1 1 ⎛ xy 3 ⎞ 1 ⎛ x⎞ fx ( x) = ∫ 1 ( ) 1 10 − xy 2 dy = ⎜ 10 y − ⎟ = ⎜10 − ⎟ 0 64 64 ⎝ 3 ⎠ 0 64 ⎝ 3⎠ 10 10 10 1 ⎛ x2 ⎞ 1 ⎛ 2 x3 ⎞ Then E ( X ) = ∫ x f x ( x)dx = ∫ ⎜10 x − ⎟ dx = ⎜ 5x − ⎟ 2 2 64 ⎝ 3⎠ 64 ⎝ 9 ⎠2 1 ⎡⎛ 1000 ⎞ ⎛ 8 ⎞⎤ = ⎢ ⎜ 500 − ⎟ − ⎜ 20 − ⎟ ⎥ = 5. t t = 2x 4 t=x 3 2 1 x 1 2 -------------------------------------------------------------------------------------------------------- 121. ⎧3 2 1 3 ⎪ x ⋅ = x . denote the time required to process a claim by T. otherwise.120. x < t < 2 x.778 64 ⎣⎝ 9 ⎠ ⎝ 9 ⎠⎦ Page 53 of 56 . 0 ≤ x ≤ 2 Then the joint pdf of X and T is f ( x. In addition. t ) = ⎨ 8 x 8 ⎪⎩0. Solution: A We are given that X denotes loss.17 . Now we can find P[T ≥ 3] = ⎡ 3 2⎤ ⎛ 12 3 2 ⎞ ⎡12 1 3 ⎤ ⎛ 36 27 ⎞ 4 2 4 2 4 4 3 12 ∫3 t∫/ 2 8 xdxdt = ∫3 ⎢⎣16 ⎥⎦ t / 2 ∫3 ⎝⎜ 16 64 ⎠⎟ ⎣⎢16 64 ⎦⎥ 3 = 4 − 1 − ⎝⎜ 16 − 64 ⎠⎟ x dt = − t dt = − t = 11/64 = 0.

Solution: D y y The marginal distribution of Y is given by f2(y) = ∫ 6 e e –x –2y dx = 6 e –2y ∫e −x dx 0 0 = −6 e–2y e–y + 6e–2y = 6 e–2y – 6 e–3y.83 .122 *Uses that if X has an exponential distribution with mean μ ∞ ∞ − a − b 1 1 Pr ( a ≤ X ≤ b ) = Pr ( X ≥ a ) − Pr ( X ≥ b ) = ∫ dt − ∫ μ −t μ −t μ μ e e dt = e −e a μ b μ Page 54 of 56 . -------------------------------------------------------------------------------------------------------- 123. E(Y) = − 6 ye ) dy = 6 dy – 6 e–3y dy = 0 0 0 0 ∞ ∞ 6 6 20∫ 2 ye–2y dy − ∫ 3 y e–3y dy 30 ∞ ∞ But ∫ 2 y e–2y dy and ∫ 3 y e–3y dy are equivalent to the means of exponential random 0 0 ∞ variables with parameters 1/2 and 1/3. In other words. ∫ 2 y e–2y dy = 1/2 0 ∞ and ∫ 3 y e–3y dy = 1/3 .122. 0 < y < ∞ ∞ ∞ ∞ ∞ ∫y f2(y) dy = ∫ (6 ye ∫ ye ∫y −2 y −3 y −2 y Therefore. 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. respectively. 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] 1 −4 ( −8 ) ( 1 −1 = e 5 − e 5 + e 2 − e −1 * 3 6 ) = 0.

f X .Y) is 0 < y < x < 1. Because of the memoryless property of the exponential distribution.y) can be written as f ( x) f ( y ) = e − x 2e −2 y and the support of f(x. the conditional density of Y is the same as the unconditional density of Y+3. y ) = f ( y | x) f X ( x) = 2 on that support. Solution: A Because f(x.5 and the variance of an exponential distribution is always equal to the square of its mean.124.y) is a cross product.Y ( x. Solution: E The support of (X. Because a location shift does not affect the variance.Y ( x. Because the mean of Y is 0. It is clear geometrically (a flat joint density over the triangular region 0 < y < x < 1) that when Y = y 1 we have X ~ U(y. --------------------------------------------------------------------------------------------------------------------- 125. y ) 2 1 f Y ( y ) = ∫ 2dx = 2 − 2 y ⇒ f ( x | y ) = = = for y < x < 1 y f Y ( y) 2 − 2y 1− y Page 55 of 56 . X and Y are independent. Thus. 1− y By computation: 1 f X . the conditional variance of Y is equal to the unconditional variance of Y.25. the condition on X can be ignored and it suffices to just consider f ( y ) = 2e −2 y . the requested variance is 0. 1) so that f ( x | y ) = for y < x < 1 .

Solution: C 2 Using the notation of the problem. we know that p0 + p1 = and 5 p0 + p1 + p2 + p3 + p4 + p5 = 1 .9626)=0. Thus p0 = .069044968⎥ ⎢⎣ (200)(24. 120 120 120 ----------------------------------------------------------------------------------------------------------- 127.25 * 0 + 0. ⎡ S − (200)(5625) ⎤ P[1. 15000 2 E[ X 2 ] = 0.375) ⎥⎦ which interpolates to 0.609.75 * (7500 2 + ) = 56.000.375 .267 . E[ X ] = 0. 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. Thus p 0 + ( p 0 − c ) + ( p 0 − 2c ) + ..250. + ( p 0 − 5c ) = 6 p 0 − 15c = 1.25 * 0 + 0.200. Solving simultaneously ⎨ 2 5 ⎪⎩2 p0 − c = 5 6 6 p0 − 3c = 5 1 2 1 25 25 ⇒ −6 p0 + 15c = −1 . Page 56 of 56 .75 * 7500 = 5625 . 60 5 60 60 120 1 12c = 5 17 15 32 We want p4 + p5 = ( p0 − 4c ) + ( p0 − 5c ) = + = = 0. Then pn = p0 − nc for 1 ≤ n ≤ 5 .25 and otherwise the payout is U(0.609.8201 from the provided table.126. So. Let pn − pn +1 = c for all n ≤ 4 .000] = P ⎢− 1. so the variance of one claim is 12 Var ( X ) = E[ X 2 ] − E[ X ]2 = 24. For one loss there is no payout with probability 0..8575-(1-0. So c = and 2 p0 = + = .000 .781741613 < < 1. 15000). ⎧6 p0 − 15c = 1 2 ⎪ Also p0 + p1 = p0 + ( p0 − c ) = 2 p0 − c = .000 < S < 1. Applying the CLT.