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EXAM P PROBABILITY

P SAMPLE EXAM QUESTIONS

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 100

1.

A survey of a group’s viewing habits over the last year revealed the following information:

(i) (ii) (iii) (iv) (v) (vi) (vii)

28% watched gymnastics 29% watched baseball 19% watched soccer 14% watched gymnastics and baseball 12% watched baseball and soccer 10% watched gymnastics and soccer 8% watched all three sports.

Calculate the percentage of the group that watched none of the three sports during the last year.

(A) (B) (C) (D) (E)

24 36 41 52 60

2 of 100

2.

The probability that a visit to a primary care physician’s (PCP) office results in neither lab work nor referral to a specialist is 35% . Of those coming to a PCP’s office, 30% are referred to specialists and 40% require lab work.

Determine the probability that a visit to a PCP’s office results in both lab work and referral to a specialist.

(A) (B) (C) (D) (E)

0.05 0.12 0.18 0.25 0.35

3.

You are given P[A∪B] = 0.7 and P[A∪B′] = 0.9 .

Determine P[A] .

(A) (B) (C) (D) (E)

0.2 0.3 0.4 0.6 0.8

3 of 100

and single? 4 of 100 . 3010 married males. male or female. 4600 are male. 600 of the policyholders are young married males. Calculate the number of blue balls in the second urn. Finally. A second urn contains 16 red balls and an unknown number of blue balls. and 7000 are married. Each policyholder is classified as (i) (ii) (iii) young or old. An urn contains 10 balls: 4 red and 6 blue. How many of the company’s policyholders are young.000 policyholders.44 . (A) (B) (C) (D) (E) 5. A single ball is drawn from each urn. 3000 are young. and married or single. The policyholders can also be classified as 1320 young males. 4 20 24 44 64 An auto insurance company has 10. female. Of these policyholders. The probability that both balls are the same color is 0. and 1400 young married persons.4.

(A) (B) (C) (D) (E) 6.115 0. and.224 0. Determine the probability that a man randomly selected from this group died of causes related to heart disease.173 0. (A) (B) (C) (D) (E) 0. of these 312 men.327 0. 102 died from causes related to heart disease.514 5 of 100 . given that neither of his parents suffered from heart disease. Moreover. 312 of the 937 men had at least one parent who suffered from heart disease. 280 423 486 880 896 A public health researcher examines the medical records of a group of 937 men who died in 1999 and discovers that 210 of the men died from causes related to heart disease.

(A) (B) (C) (D) (E) 20 29 41 53 70 6 of 100 . Using the company’s estimates.7. The company estimates that 80% of policyholders who have both an auto and a homeowners policy will renew at least one of those policies next year. calculate the percentage of policyholders that will renew at least one policy next year. and 15% of policyholders have both an auto and a homeowners policy. An insurance company estimates that 40% of policyholders who have only an auto policy will renew next year and 60% of policyholders who have only a homeowners policy will renew next year. Company records show that 65% of policyholders have an auto policy. 50% of policyholders have a homeowners policy.

48 0. whereas 12% visit neither of these. Calculate the probability that a randomly selected customer insures exactly one car and that car is not a sports car.26 0. Among a large group of patients recovering from shoulder injuries. (A) (B) (C) (D) (E) 9. Of those customers who insure more than one car. 20% of the customers insure a sports car. 0.14 the probability that a patient visits a physical therapist. it is found that 22% visit both a physical therapist and a chiropractor.38 0. 7 of 100 . The probability that a patient visits a chiropractor exceeds by 0.62 An insurance company examines its pool of auto insurance customers and gathers the following information: (i) (ii) (iii) (iv) All customers insure at least one car. Determine the probability that a randomly chosen member of this group visits a physical therapist. 15% insure a sports car.8.40 0. 70% of the customers insure more than one car.

31 8 of 100 . and that car is not a sports car? (A) (B) (C) (D) (E) 0.21 0. 15% insure a sports car. What is the probability that a randomly selected customer insures exactly one car.19 0. 64% of the customers insure more than one car.26 0.24 0. 20% of the customers insure a sports car.13 0. Of those customers who insure more than one car.29 0.30 An insurance company examines its pool of auto insurance customers and gathers the following information: (i) (ii) (iii) (iv) All customers insure at least one car.25 0. 0.16 0.(A) (B) (C) (D) (E) 10.

82 9 of 100 .48 0. The event that an automobile owner purchases collision coverage is independent of the event that he or she purchases disability coverage.33 0. What is the probability that an automobile owner purchases neither collision nor disability coverage? (A) (B) (C) (D) (E) 0.67 0. An actuary studying the insurance preferences of automobile owners makes the following conclusions: (i) (ii) (iii) An automobile owner is twice as likely to purchase collision coverage as disability coverage.18 0.11. The probability that an automobile owner purchases both collision and disability coverages is 0.15 .

For any two of the three factors.12 that she has exactly these two risk factors (but not the other). 3 10 of 100 . one-third have high blood pressure. 15% have an irregular heartbeat. She finds that: (i) (ii) (iii) (iv) (v) 14% have high blood pressure. A doctor is studying the relationship between blood pressure and heartbeat abnormalities in her patients. and C. Of those with an irregular heartbeat. given that she has A and B.12. or normal) and their heartbeats (regular or irregular). What portion of the patients selected have a regular heartbeat and low blood pressure? (A) (B) (C) (D) (E) 13. the probability is 0. low. 2% 5% 8% 9% 20% An actuary is studying the prevalence of three health risk factors. 22% have low blood pressure. B. The probability that a woman has all three risk factors. is 1 . one-eighth have an irregular heartbeat. Of those with normal blood pressure. the probability is 0. within a population of women. She tests a random sample of her patients and notes their blood pressures (high.1 that a woman in the population has only this risk factor (and no others). For each of the three factors. denoted by A.

pn +1 = 1 pn .16 0.280 0.04 0.467 0.311 0.What is the probability that a woman has none of the three risk factors.80 0. given that she does not have risk factor A? (A) (B) (C) (D) (E) 14.700 In modeling the number of claims filed by an individual under an automobile policy during a three-year period. 0. Under this assumption.96 11 of 100 . an actuary makes the simplifying assumption that for all integers n ≥ 0.484 0.20 0. what is the probability that a policyholder files more than one claim during the period? (A) (B) (C) (D) (E) 0. where pn represents the probability that the policyholder files 5 n claims during the period.

15.

An insurer offers a health plan to the employees of a large company. As part of this plan, the individual employees may choose exactly two of the supplementary coverages A, B, and C, or they may choose no supplementary coverage. The proportions of the company’s employees that choose coverages A, B, and C are respectively.

1 1 5 , , and , 4 3 12

Determine the probability that a randomly chosen employee will choose no supplementary coverage.

(A) (B) (C) (D) (E)

0

47 144

1 2 97 144 7 9

12 of 100

16.

An insurance company determines that N, the number of claims received in a week, is a random variable with P[N = n] = 1 1 , where n ≥ 0 . The company also determines that 2n+ the number of claims received in a given week is independent of the number of claims received in any other week.

Determine the probability that exactly seven claims will be received during a given two-week period. (A) (B) (C) (D) (E) 1 256 1 128 7 512 1 64 1 32

13 of 100

17.

An insurance company pays hospital claims. The number of claims that include emergency room or operating room charges is 85% of the total number of claims. The number of claims that do not include emergency room charges is 25% of the total number of claims. The occurrence of emergency room charges is independent of the occurrence of operating room charges on hospital claims.

**Calculate the probability that a claim submitted to the insurance company includes operating room charges. (A) (B) (C) (D) (E)
**

18.

0.10 0.20 0.25 0.40 0.80

Two instruments are used to measure the height, h, of a tower. The error made by the less accurate instrument is normally distributed with mean 0 and standard deviation 0.0056h . The error made by the more accurate instrument is normally distributed with mean 0 and standard deviation 0.0044h .

Assuming the two measurements are independent random variables, what is the probability that their average value is within 0.005h of the height of the tower?

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38 0.16 0.08 0.49 0. An actuary compiled the following statistics on the company’s insured drivers: Age of Driver 16-20 21-30 31-65 66-99 Probability of Accident 0. (A) (B) (C) (D) (E) 0.28 A randomly selected driver that the company insures has an accident.47 0.19 0.13 0.03 0.02 0.68 0.15 0.04 Portion of Company’s Insured Drivers 0. 0.06 0.40 15 of 100 .(A) (B) (C) (D) (E) 19.84 0.23 0. Calculate the probability that the driver was age 16-20.90 An auto insurance company insures drivers of all ages.

010 of dying in the next year. and ultra-preferred.0141 0. 50% are standard. and 10% are ultra-preferred.0001 0.001 of dying in the next year.0071 0. Of the company’s policyholders.2817 16 of 100 . 40% are preferred. An insurance company issues life insurance policies in three separate categories: standard. preferred. each preferred policyholder has probability 0. A policyholder dies in the next year.0010 0. Each standard policyholder has probability 0.20.005 of dying in the next year. What is the probability that the deceased policyholder was ultra-preferred? (A) (B) (C) (D) (E) 0. and each ultra-preferred policyholder has probability 0.

or stable. 40% of the critical patients died. but only half as likely as heavy smokers. Upon arrival at a hospital’s emergency room. 17 of 100 . Results of the study showed that light smokers were twice as likely as nonsmokers to die during the five-year study.29 0.64 A health study tracked a group of persons for five years.06 0. and 1% of the stable patients died.39 0. A randomly selected participant from the study died over the five-year period.21. patients are categorized according to their condition as critical. 20% were classified as heavy smokers.30 0. what is the probability that the patient was categorized as serious upon arrival? (A) (B) (C) (D) (E) 22. 10% of the serious patients died. and 50% as nonsmokers. 30% of the emergency room patients were serious. At the beginning of the study. the rest of the emergency room patients were stable. serious. 0. Given that a patient survived. 30% as light smokers. In the past year: (i) (ii) (iii) (iv) (vi) (vii) 10% of the emergency room patients were critical.

Calculate the probability that the participant was a heavy smoker.42 0. (A) (B) (C) (D) (E) 23.04 0.15 0.25 18 of 100 .20 0.19 0. Type of driver Teen Young adult Midlife Senior Total Percentage of all drivers 8% 16% 45% 31% 100% Probability of at least one collision 0.16 0. 0. The results of the study are presented below.57 An actuary studied the likelihood that different types of drivers would be involved in at least one collision during any one-year period.08 0. what is the probability that the driver is a young adult driver? (A) (B) (C) (D) (E) 0.22 0.25 0.05 Given that a driver has been involved in at least one collision in the past year.06 0.35 0.

(n + 1)(n + 2) Determine the probability of at least one claim during a particular month.24. The same test indicates the presence of the disease 0. A blood test indicates the presence of a particular disease 95% of the time when the disease is actually present. The number of injury claims per month is modeled by a random variable N with P[N = n] = 1 . One percent of the population actually has the disease. given that there have been at most four claims during that month. (A) (B) (C) (D) (E) 1 3 2 5 1 2 3 5 5 6 25.5% of the time when the disease is not present. 19 of 100 . Calculate the probability that a person has the disease given that the test indicates the presence of the disease. where n ≥ 0 .

25 .(A) (B) (C) (D) (E) 26. given that he is a smoker? (A) (B) (C) (D) (E) 1 4 1 3 2 5 1 2 2 3 20 of 100 .945 0.950 0. What is the conditional probability that a male has a circulation problem.995 The probability that a randomly chosen male has a circulation problem is 0. 0.657 0. Males who have a circulation problem are twice as likely to be smokers as those who do not have a circulation problem.324 0.

05 0. (A) (B) (C) (D) (E) 28.50 A hospital receives 1/5 of its flu vaccine shipments from Company X and the remainder of its shipments from other companies. 0.18 0.45 0.27.03 0.46 Probability of involvement in an accident 0.02 0.33 0.04 An automobile from one of the model years 1997. Each shipment contains a very large number of vaccine vials. Determine the probability that the model year of this automobile is 1997 . and 1999 was involved in an accident.16 0.20 0.30 0. A study of automobile accidents produced the following data: Model year 1997 1998 1999 Other Proportion of all vehicles 0.22 0. 1998. 21 of 100 .

86 The number of days that elapse between the beginning of a calendar year and the moment a high-risk driver is involved in an accident is exponentially distributed.63 0.15 0. What is the probability that this shipment came from Company X? (A) (B) (C) (D) (E) 29.For Company X’s shipments.43 0. The hospital tests 30 randomly selected vials from a shipment and finds that one vial is ineffective. 2% of the vials are ineffective.57 0.34 0.14 0. 10% of the vials are ineffective. An insurance company expects that 30% of high-risk drivers will be involved in an accident during the first 50 days of a calendar year.37 0. What portion of high-risk drivers are expected to be involved in an accident during the first 80 days of a calendar year? (A) (B) (C) (D) (E) 0. For every other company.66 22 of 100 . 0.10 0.

30. (A) (B) (C) (D) (E) 24 30 40 60 120 23 of 100 . Determine the maximum value of C for which the probability is less than 1% that the fund will be inadequate to cover all payments for high performance. independent of any other employee. what is the variance of the number of claims filed? 1 3 (A) (B) (C) (D) (E) 31. If the number of claims filed has a Poisson distribution. C. An actuary has discovered that policyholders are three times as likely to file two claims as to file four claims. Each employee has a 2% chance of achieving a high performance level during the coming year. 1 2 2 4 A company establishes a fund of 120 from which it wants to pay an amount. to any of its 20 employees who achieve a high performance level during the coming year.

018 0. 30% moderate-risk drivers.073 24 of 100 .006 0. and 20% high-risk drivers.012 0.049 0. A large pool of adults earning their first driver’s license includes 50% low-risk drivers. This month.32. an insurance company considers each driver to be randomly selected from the pool. the insurance company writes 4 new policies for adults earning their first driver’s license. Because these drivers have no prior driving record. What is the probability that these 4 will contain at least two more high-risk drivers than low-risk drivers? (A) (B) (C) (D) (E) 0.

Calculate the probability that the lifetime of the machine part is less than 6. 40) with probability density function f.94 25 of 100 . (A) (B) (C) (D) (E) 0. where f (x) is proportional to (10 + x)− 2. The lifetime of a machine part has a continuous distribution on the interval (0.04 0.33. what is the probability that it exceeds 16 ? (A) (B) (C) (D) (E) 1 25 1 9 1 8 1 3 3 7 34. The loss due to a fire in a commercial building is modeled by a random variable X with density function ⎧ 0. ⎩0 Given that a fire loss exceeds 8.47 0.53 0.005(20 − x) for 0 < x < 20 f ( x) = ⎨ otherwise.15 0.

13 0.17 0.97 A group insurance policy covers the medical claims of the employees of a small company.35.13 0. What is the conditional probability that V exceeds 40.03 0. The lifetime of a machine part has a continuous distribution on the interval (0. given that V exceeds 10.42 0.20 0. 0.000? (A) (B) (C) (D) (E) 0. V. of the claims made in one year is described by V = 100.000. where k is a constant. where f (x) is proportional to (10 + x)− 2.58 0.51 26 of 100 . 40) with probability density function f.08 0. The value. What is the probability that the lifetime of the machine part is less than 5? (A) (B) (C) (D) (E) 36.000Y where Y is a random variable with density function ⎧k (1 − y ) 4 f ( y) = ⎨ ⎩0 for 0 < y < 1 otherwise.

what is the probability that it is insured for less than 2 ? (A) (B) (C) (D) (E) 0. and a one-half refund if it fails during the second year.358 7. The lifetime of a printer costing 200 is exponentially distributed with mean 2 years.875 27 of 100 . of a randomly selected home is assumed to follow a distribution with density function ⎧3 x −4 f ( x) = ⎨ ⎩0 for x > 1 otherwise. X.829 0.256 12.869 10.578 0. 6. The insured value. how much should it expect to pay in refunds? (A) (B) (C) (D) (E) 38.5.684 0.37.704 0. If the manufacturer sells 100 printers. The manufacturer agrees to pay a full refund to a buyer if the printer fails during the first year following its purchase.321 7. Given that a randomly selected home is insured for at least 1.642 An insurance company insures a large number of homes.

39.

A company prices its hurricane insurance using the following assumptions: (i) (ii) (iii) In any calendar year, there can be at most one hurricane. In any calendar year, the probability of a hurricane is 0.05 . The number of hurricanes in any calendar year is independent of the number of hurricanes in any other calendar year.

Using the company’s assumptions, calculate the probability that there are fewer than 3 hurricanes in a 20-year period.

(A) (B) (C) (D) (E)

40.

0.06 0.19 0.38 0.62 0.92

**An insurance policy pays for a random loss X subject to a deductible of C, where
**

0 < C < 1 . The loss amount is modeled as a continuous random variable with

density function

⎧2 x f ( x) = ⎨ ⎩0

for 0 < x < 1 otherwise.

Given a random loss X, the probability that the insurance payment is less than 0.5 is equal to 0.64 .

28 of 100

Calculate C.

(A) (B) (C) (D) (E)

41.

0.1 0.3 0.4 0.6 0.8

A study is being conducted in which the health of two independent groups of ten policyholders is being monitored over a one-year period of time. Individual participants in the study drop out before the end of the study with probability 0.2 (independently of the other participants).

What is the probability that at least 9 participants complete the study in one of the two groups, but not in both groups?

(A) (B) (C) (D) (E)

0.096 0.192 0.235 0.376 0.469

29 of 100

42.

For Company A there is a 60% chance that no claim is made during the coming year. If one or more claims are made, the total claim amount is normally distributed with mean 10,000 and standard deviation 2,000 .

For Company B there is a 70% chance that no claim is made during the coming year. If one or more claims are made, the total claim amount is normally distributed with mean 9,000 and standard deviation 2,000 .

Assume that the total claim amounts of the two companies are independent.

What is the probability that, in the coming year, Company B’s total claim amount will exceed Company A’s total claim amount?

(A) (B) (C) (D) (E)

0.180 0.185 0.217 0.223 0.240

30 of 100

Calculate the probability that there will be at least four months in which no accidents occur before the fourth month in which at least one accident occurs. 2. The number of accidents that occur in any given month 5 is independent of the number of accidents that occur in all other months.3.23 0. is a discrete random variable with probability function ⎧6 − k ⎪ P ( X = k ) = ⎨ 15 ⎪0 ⎩ for k = 1.29 0. The probability that one or more accidents will occur during any given month is 3 .41 An insurance policy pays 100 per day for up to 3 days of hospitalization and 50 per day for each day of hospitalization thereafter.5 otherwise.43. A company takes out an insurance policy to cover accidents that occur at its manufacturing plant. 0. 31 of 100 . X. (A) (B) (C) (D) (E) 44.01 0. 4. The number of days of hospitalization. Determine the expected payment for hospitalization under this policy.12 0.

⎩ Calculate the expected value of X. 123 210 220 270 367 Let X be a continuous random variable with density function ⎧x for − 2 ≤ x ≤ 4 ⎪ f ( x ) = ⎨10 ⎪0 otherwise.(A) (B) (C) (D) (E) 45. (A) (B) (C) (D) (E) 1 5 3 5 1 28 15 12 5 32 of 100 .

3 2 + 3e −2 / 3 5 A piece of equipment is being insured against early failure.5x if failure occurs during the second or third year. the time to discovery of its failure is X = max(T. 2) . If failure occurs after the first three years. T. Determine E[X]. The insurance will pay an amount x if the equipment fails during the first year. The time from purchase until failure of the equipment is exponentially distributed with mean 10 years. to failure of this device is exponentially distributed with mean 3 years.46. 1 2 + e−6 3 2 − 2e −2 / 3 + 5e−4 / 3 (A) (B) (C) (D) (E) 47. The time. At what level must x be set if the expected payment made under this insurance is to be 1000 ? (A) (B) (C) (D) (E) 3858 4449 5382 5644 7235 33 of 100 . and it will pay 0. A device that continuously measures and records seismic activity is placed in a remote region. no payment will be made. Since the device will not be monitored during its first two years of service.

5 otherwise. 2234 2400 2500 2667 2694 An insurance policy pays an individual 100 per day for up to 3 days of hospitalization and 25 per day for each day of hospitalization thereafter.3.4 .48. 2. 34 of 100 . 4. the probability of failure during that year is 0. The number of days of hospitalization. An insurance policy on an electrical device pays a benefit of 4000 if the device fails during the first year. What is the expected benefit under this policy? (A) (B) (C) (D) (E) 49. is a discrete random variable with probability function ⎧6 − k ⎪ P ( X = k ) = ⎨ 15 ⎪0 ⎩ for k = 1. X. The amount of the benefit decreases by 1000 each successive year until it reaches 0 . If the device has not failed by the beginning of any given year. Calculate the expected payment for hospitalization under this policy.

769 5. The number of major snowstorms per year that shut down business is assumed to have a Poisson distribution with mean 1.5 .231 8. until the end of the year. 85 163 168 213 255 A company buys a policy to insure its revenue in the event of major snowstorms that shut down business.347 10.000 for each one thereafter.000 7.(A) (B) (C) (D) (E) 50. The policy pays nothing for the first such snowstorm of the year and 10. What is the expected amount paid to the company under this policy during a one-year period? (A) (B) (C) (D) (E) 2.578 35 of 100 .

95 1.6 otherwise.5(0.6) 2.84 0. Determine the net premium for this policy. . .5 ⎪0 ⎩ for x > 0. A manufacturer’s annual losses follow a distribution with density function ⎧ 2.00 An insurance company sells a one-year automobile policy with a deductible of 2 . 5 and K a constant. the probability of a loss of amount N is K . 0.93 0.51. The probability that the insured will incur a loss is 0.05 . for N = 1. . What is the mean of the manufacturer’s annual losses not paid by the insurance policy? (A) (B) (C) (D) (E) 52. 36 of 100 . the manufacturer purchases an insurance policy with an annual deductible of 2. These N are the only possible loss amounts and no more than one loss can occur. If there is a loss. . To cover its losses.5 ⎪ f ( x) = ⎨ x3.88 0.

110 0. 0. follows a distribution with density function: ⎧2 ⎪ f ( y) = ⎨ y 3 ⎪0.0 1.031 0.150 An insurance policy reimburses a loss up to a benefit limit of 10 .3 1.072 0. The policyholder’s loss. Y.0 37 of 100 .9 2.8 1. ⎩ for y > 1 otherwise.066 0.(A) (B) (C) (D) (E) 53. What is the expected value of the benefit paid under the insurance policy? (A) (B) (C) (D) (E) 1.

54. whose probability density function is proportional to (1 + x)−4. positive random variable X. During the policy year there is a 0. If there is partial damage to the car. An auto insurance company insures an automobile worth 15. the amount X of damage (in thousands) follows a distribution with density function ⎧0. where 0 < x < ∞ .000 deductible. 1 6 1 3 1 2 1 3 38 of 100 (A) (B) (C) (D) (E) .04 chance of partial damage to the car and a 0. 320 328 352 380 540 An insurance company’s monthly claims are modeled by a continuous. Determine the company’s expected monthly claims.5003 e − x / 2 f ( x) = ⎨ ⎩0 for 0 < x < 15 otherwise.000 for one year under a policy with a 1.02 chance of a total loss of the car. What is the expected claim payment? (A) (B) (C) (D) (E) 55.

340 5. X.000 8.000 11. (1 − 2500t ) 4 Determine the standard deviation of the claim size for this class of accidents. (A) (B) (C) (D) (E) 1. 1000] . At what level must a deductible be set in order for the expected payment to be 25% of what it would be with no deductible? (A) (B) (C) (D) (E) 57. X.660 10.56. with moment generating function MX(t) = 1 . where X has a uniform distribution on [0.180 39 of 100 . 250 375 500 625 750 An actuary determines that the claim size for a certain class of accidents is a random variable. An insurance policy is written to cover a loss.

K.58. Calculate E(X3) .5 Let X represent the combined losses from the three cities. and L .000 10. The moment generating functions for the loss distributions of the cities are: MJ(t) = (1 – 2t)−3 MK(t) = (1 – 2t)−2.560 40 of 100 .320 2. Since sufficient distance separates the cities.5 ML(t) = (1 – 2t)−4. it is reasonable to assume that the losses occurring in these cities are independent.082 5. J. A company insures homes in three cities. (A) (B) (C) (D) (E) 1.760 8.

X. 35 93 124 231 298 A recent study indicates that the annual cost of maintaining and repairing a car in a town in Ontario averages 200 with a variance of 260. what will be the variance of the annual cost of maintaining and repairing a car? (A) (B) (C) (D) (E) 208 260 270 312 374 41 of 100 ..e. everything is made 20% more expensive). An insurer's annual weather-related loss.5 ⎪0 ⎩ for x > 200 otherwise. Calculate the difference between the 30th and 70th percentiles of X .5 ( 200 )2.5 ⎪ f ( x) = ⎨ x 3. If a tax of 20% is introduced on all items associated with the maintenance and repair of cars (i. (A) (B) (C) (D) (E) 60. is a random variable with density function ⎧ 2.59.

(A) (B) (C) (D) (E) 7 72 1 8 5 36 4 3 23 12 42 of 100 . Calculate the variance of X. Calculate the difference between the 25th and 75th percentiles of X .5 ( 200 )2. is a random variable with density function ⎧ 2. An insurer's annual weather-related loss.61. 124 148 167 224 298 A random variable X has the cumulative distribution function ⎧0 ⎪ 2 ⎪ x − 2x + 2 F ( x) = ⎨ 2 ⎪ ⎪1 ⎩ for x < 1 for 1 ≤ x < 2 for x ≥ 2. X. (A) (B) (C) (D) (E) 62.5 ⎪ f ( x) = ⎨ x 3.5 ⎪0 ⎩ for x > 200 otherwise.

15 0. (A) (B) (C) (D) (E) 64. Let Y be the age of the machine at the time of replacement. The warranty on a machine specifies that it will be replaced at failure or age 4. 1. has density function ⎧ 1 ⎪ f ( x) = ⎨ 5 ⎪0 ⎩ for 0 < x < 5 otherwise.30 What percentage of the claims are within one standard deviation of the mean claim size? 43 of 100 . X.20 0.10 0.5 A probability distribution of the claim sizes for an auto insurance policy is given in the table below: Claim Size 20 30 40 50 60 70 80 Probability 0.4 1.1 7. Determine the variance of Y. The machine’s age at failure.3 1.10 0.63.05 0.10 0.7 2. whichever occurs first.

repair costs can be modeled by a uniform random variable on the interval (0. 1500) . (A) (B) (C) (D) (E) 361 403 433 464 521 44 of 100 . In the event that the automobile is damaged.(A) (B) (C) (D) (E) 65. Determine the standard deviation of the insurance payment in the event that the automobile is damaged. 45% 55% 68% 85% 100% The owner of an automobile insures it against damage by purchasing an insurance policy with a deductible of 250 .

66. The four bids are regarded as four independent random variables with common cumulative distribution function F ( x) = 1 (1 + sin π x ) 2 for 3 5 ≤x≤ . 2 2 Which of the following represents the expected value of the accepted bid? (A) π 5/ 2 3/ 2 ∫ x cos π x dx 5/ 2 (B) 1 4 ∫2 (1 + sin π x ) dx 16 3/ 1 4 ∫2 x (1 + sin π x ) dx 16 3/ 1 3 π ∫ cos π x (1 + sin π x ) dx 4 3/ 2 1 3 π ∫ x cos π x (1 + sin π x ) dx 4 3/ 2 5/ 2 5/ 2 5/ 2 (C) (D) (E) 45 of 100 . A company agrees to accept the highest of four sealed bids on a property.

The probability density function for X is: ⎧ce −0.004 x for x ≥ 0 ⎪ f ( x) = ⎨ otherwise. A baseball team has scheduled its opening game for April 1. up to 2 days. The policy will pay 1000 for each day. If it rains on April 1. the game is postponed and will be played on the next day that it does not rain. What is the standard deviation of the amount the insurance company will have to pay? (A) (B) (C) (D) (E) 668 699 775 817 904 68. X.6 .67. ⎪0 ⎩ where c is a constant. The insurance company determines that the number of consecutive days of rain beginning on April 1 is a Poisson random variable with mean 0. The team purchases insurance against rain. up to a maximum benefit of 250 . Calculate the median benefit for this policy. 46 of 100 . An insurance policy reimburses dental expense. that the opening game is postponed.

38 0.(A) (B) (C) (D) (E) 69.07 0. (A) (B) (C) (D) (E) 0.29 0.42 0. Calculate the probability that the component will work without failing for at least five hours. 161 165 173 182 250 The time to failure of a component in an electronic device has an exponential distribution with a median of four hours.57 47 of 100 .

70. 600 700 800 900 1000 The time. The resulting cost to the company is Y = T 2 . Losses incurred follow an exponential distribution with mean 300. Determine the density function of Y. that a manufacturing system is out of operation has cumulative distribution function ⎧ ⎛ 2 ⎞2 ⎪1 − F (t ) = ⎨ ⎜ t ⎟ ⎝ ⎠ ⎪0 ⎩ for t > 2 otherwise. 48 of 100 . subject to a deductible of 100 . An insurance company sells an auto insurance policy that covers losses incurred by a policyholder. T. for y > 4 . What is the 95th percentile of actual losses that exceed the deductible? (A) (B) (C) (D) (E) 71.

408 10. of V for values of v that satisfy 0 < F (v) < 1.833 − 10. An investment account earns an annual interest rate R that follows a uniform distribution on the interval ( 0.04. 000e R . 0. 000ev /10. Determine the cumulative distribution function.000 initial investment in this account after one year is given by V = 10.08 ) .000 − 0. 408 425 25ev /10. F ( v ) .04 ⎥ ⎣ ⎝ 10. 408 25 v ⎡ ⎛ v ⎞ ⎤ 25 ⎢ln ⎜ ⎟ − 0.04 (B) (C) v − 10.(A) 4 y2 8 y 3/ 2 8 y3 16 y 1024 y5 (B) (C) (D) (E) 72. (A) 10. The value of a 10.000 − 10. 000 ⎠ ⎦ (D) (E) 49 of 100 .

25 e −0.125(0. Which of the following is the density function of the random variable R on the interval F 10 ≤ r ≤ 10 I ? H 12 8 K (A) (B) (C) 12 5 3− 5 2r 5 ln(r ) 2 3r − 50 of 100 .73. Let R denote the average rate. An actuary models the lifetime of a device using the random variable Y = 10X 0. (A) (B) (C) (D) (E) 10 y 0.25 e − (0. for y > 0. Determine the probability density function f (y).1y )1.1y )0.2e − (0. of the random variable Y. in customers per minute.125(0. Let T denote the time in minutes for a customer service representative to respond to 10 telephone inquiries.25 0. T is uniformly distributed on the interval with endpoints 8 minutes and 12 minutes.1 y ) 1.2 8 y −0. where X is an exponential random variable with mean 1 year.1 y ) 1.8e −8 y −0.8. at which the representative responds to inquiries.25 74.8 8 y −0.25 (0.2 e −10 y 0.1 y ) 0.

Determine the probability density function of the monthly profit of Company II. Suppose 3 such claims will be made. 51 of 100 .(D) (E) 10 r2 5 2r 2 75. Company II has a monthly profit that is twice that of Company I. Claim amounts for wind damage to insured homes are independent random variables with common density function ⎧ 3 ⎪ f ( x ) = ⎨ x4 ⎪0 ⎩ for x >1 otherwise where x is the amount of a claim in thousands. The monthly profit of Company I can be modeled by a continuous random variable with density function f . (A) (B) (C) (D) (E) 1 2 ⎛ x⎞ f⎜ ⎟ ⎝2⎠ ⎛ x⎞ f⎜ ⎟ ⎝2⎠ ⎛ x⎞ 2f ⎜ ⎟ ⎝2⎠ 2 f ( x) 2 f (2 x) 76.

8 What is the probability that the device fails during its first hour of operation? (A) (B) (C) (D) (E) 0.625 0. is f ( x. 2025 2700 3232 3375 4500 A device runs until either of two components fails.141 0.875 52 of 100 . The joint density function of the lifetimes of the two components.125 0. at which point the device stops running.What is the expected value of the largest of the three claims? (A) (B) (C) (D) (E) 77. y ) = x+ y for 0 < x < 2 and 0 < y < 2 .391 0. both measured in hours.

78. The device fails if either component fails. 27 Calculate the probability that the device fails during its first hour of operation.04 0. 0. measured in hours. The joint density function of the lifetimes of the components.5 0. t ) ds dt 0 0 (B) ∫ ∫ f ( s. t ) ds dt 0 0 1 1 (D) + ∫ ∫ f ( s.5 0.41 0. y ) = x+ y for 0 < x < 3 and 0 < y < 3 . The joint density function of the lifetimes of the two components. t ) ds dt ∫ ∫ f ( s.96 A device contains two components. A device runs until either of two components fails. t ) .44 0. where 0 < s < 1 and 0 < t < 1 . is f ( s. t ) ds dt 0 0 1 0. is f ( x. both measured in hours. (A) (B) (C) (D) (E) 79.59 0. What is the probability that the device fails during the first half hour of operation? (A) 0.5 0.5 ∫ ∫ f ( s.5 1 ∫ ∫ f ( s.5 53 of 100 .5 (C) 0. at which point the device stops running. t ) ds dt 0 0 1 0.

What is the probability that the average of 25 randomly selected claims exceeds 20. t ) ds dt 0 0 1 0.338.000 6.784.15 0.(E) 0.000 6. t ) ds dt 0 0.33 0.01 0.000 6. 6.328.343.400 and standard deviation 5.5 ∫ ∫ f ( s. A charity receives 2025 contributions. Contributions are assumed to be independent and identically distributed with mean 3125 and standard deviation 250.5 80.000 6.27 0. (A) (B) (C) (D) (E) 81.5 1 + ∫ ∫ f ( s.000.000 Claims filed under auto insurance policies follow a normal distribution with mean 19.45 54 of 100 . Calculate the approximate 90th percentile for the distribution of the total contributions received.000 ? (A) (B) (C) (D) (E) 0.977.

68 0.87 0. An insurance company issues 1250 vision care insurance policies. A consumer buys a number of these bulbs with the intention of replacing them successively as they burn out. Assume the numbers of claims filed by distinct policyholders are independent of one another. 0. The number of claims filed by a policyholder under a vision care insurance policy during one year is a Poisson random variable with mean 2.00 A company manufactures a brand of light bulb with a lifetime in months that is normally distributed with mean 3 and variance 1 . The light bulbs have independent lifetimes. What is the smallest number of bulbs to be purchased so that the succession of light bulbs produces light for at least 40 months with probability at least 0.95 1.82.82 0.9772? (A) (B) (C) (D) (E) 14 16 20 40 55 55 of 100 . What is the approximate probability that there is a total of between 2450 and 2600 claims during a one-year period? (A) (B) (C) (D) (E) 83.

Approximate the value of P(T < 7100). The following information is known about X and Y: E( X ) E (Y ) Var ( X ) Var (Y ) = 50 = 20 = 50 = 30 Cov ( X .84.84 0. respectively.92 0. Y ) = 10 One hundred people are randomly selected and observed for these three months. Let T be the total number of hours that these one hundred people watch movies or sporting events during this three-month period. (A) (B) (C) (D) (E) 0.97 56 of 100 .62 0. Let X and Y be the number of hours that a randomly selected person watches movies and sporting events.87 0. during a three-month period.

25 . If 100 policies are sold. the probability that she is not married at the time of retirement is 0.407 0. 0. if the new hire is married at the time of her retirement. what is the approximate probability that the insurance company will have claims exceeding the premiums collected? (A) (B) (C) (D) (E) 86. a second pension will be provided for her husband. 1000 The premium for the policy is set at 100 over the expected total claim amount.460 A city has just added 100 new female recruits to its police force.159 0.4 probability of remaining with the police force until retirement. In addition. The city will provide a pension to each new hire who remains with the force until retirement.333 0. A consulting actuary makes the following assumptions: (i) (ii) Each new recruit has a 0. The total claim amount for a health insurance policy follows a distribution with density function f ( x) = 1 −( x /1000) e for x > 0 . 57 of 100 .001 0. Given that a new recruit reaches retirement with the police force.85.

57 0. The difference between the true age and the rounded age is assumed to be uniformly distributed on the interval from −2.5 years.60 0.67 0.5 years to 2.14 0. ages have been rounded to the nearest multiple of 5 years.77 0. What is the approximate probability that the mean of the rounded ages is within 0.75 0. (A) (B) (C) (D) (E) 87.38 0. The healthcare data are based on a random sample of 48 people.88 58 of 100 .(iii) The number of pensions that the city will provide on behalf of each new hire is independent of the number of pensions it will provide on behalf of any other new hire.93 0.99 In an analysis of healthcare data.25 years of the mean of the true ages? (A) (B) (C) (D) (E) 0. Determine the probability that the city will provide at most 90 pensions to the 100 new hires and their husbands. 0.

respectively. y ) = ⎨125. What is the probability that the first claim from a good driver will be filed within 3 years and the first claim from a bad driver will be filed within 2 years? (A) (B) (C) (D) (E) 1 1 − e −2 / 3 − e −1/ 2 + e −7 / 6 18 d i 1 −7 / 6 e 18 1 − e −2 / 3 − e −1/ 2 + e −7/ 6 1 − e −2 / 3 − e −1/ 2 + e −1/ 3 1 1 1 1 − e −2 / 3 − e −1/ 2 + e −7 / 6 3 6 18 89. What is the probability that both components are still functioning 20 months from now? 59 of 100 . The future lifetimes (in months) of two components of a machine have the following joint density function: ⎧ 6 (50 − x − y ) ⎪ f ( x. The waiting time for the first claim from a good driver and the waiting time for the first claim from a bad driver are independent and follow exponential distributions with means 6 years and 3 years.88. 000 ⎪0 ⎩ for 0 < x < 50 − y < 50 otherwise.

223 0. The time until the next Deluxe Policy claim is an independent exponential random variable with mean three days. What is the probability that the next claim will be a Deluxe Policy claim? (A) (B) (C) (D) (E) 0. 000 20 50 30 50 − x 20 ∫ (50 − x − y )dydx (C) 30 50 − x − y 20 50 − x ∫ (50 − x − y )dydx (D) 6 ∫ 125.400 0. 000 20 6 ∫ 125. The time until the next Basic Policy claim is an exponential random variable with mean two days. 000 20 20 ∫ (50 − x − y )dydx (E) 50 50 − x − y 20 ∫ (50 − x − y )dydx 90. 000 ∫ 0 20 20 ∫ (50 − x − y)dydx 0 (B) 6 ∫ 125.172 0.500 60 of 100 . An insurance company sells two types of auto insurance policies: Basic and Deluxe.487 0.(A) 6 125. 000 20 6 ∫ 125.

Determine the probability that the company considers the two bids further.10 0.71 0. The company decides to accept the lower bid if the two bids differ by 20 or more.33 0. Assume that the two bids are independent and are both uniformly distributed on the interval from 2000 to 2200.41 0. Let X be the random variable representing the company’s losses under collision insurance. (A) (B) (C) (D) (E) 0. 0. and let Y represent the company’s losses under liability insurance. An insurance company insures a large number of drivers.38 0. y ) = ⎨ 4 ⎪0 ⎩ for 0 < x < 1 and 0 < y < 2 otherwise.41 0. Otherwise.60 61 of 100 . The bids must be between 2000 and 2200 . the company will consider the two bids further.91. What is the probability that the total loss is at least 1 ? (A) (B) (C) (D) (E) 92.20 0.19 0. X and Y have joint density function ⎧ 2x + 2 − y ⎪ f ( x.75 Two insurers provide bids on an insurance policy to a large company.

7 6. (A) (B) (C) (D) (E) 4. One policy has a deductible of 1 and the other has a deductible of 2. Calculate the probability that the total benefit paid to the family does not exceed 5. is constant over the region 0 < t1 < 6. f (t1 .25 0.32 0.0 5.93. The family experiences exactly one loss under each policy. Let T2 be the time between the report of the claim and payment of the claim.30 0. (A) (B) (C) (D) (E) 94. 0. t2 ) . Losses under the two policies are independent and have continuous uniform distributions on the interval from 0 to 10.9 5.13 0. 0< t2 < 6.42 Let T1 be the time between a car accident and reporting a claim to the insurance company. the expected time between a car accident and payment of the claim. Determine E[T1 + T2]. The joint density function of T1 and T2. A family buys two policies from the same insurance company.0 6.7 62 of 100 . t1 + t2 < 10. and zero otherwise.

The operator knows that tourists may not show up. X and Y are independent random variables with common moment generating function M ( t ) = et 2 /2 . and is non-refundable if a tourist fails to show up. Determine the joint moment generating function.02. M ( t1 . If a tourist shows up and a seat is not available. so he sells 21 tickets. the tour operator has to pay 100 (ticket cost + 50 penalty) to the tourist. The probability that an individual tourist will not show up is 0.95. Each ticket costs 50. t2 ) . e 2 t1 + 2 t2 e(t1 −t2 ) e(t1 + t2 ) 2 2 2 2 e 2t1t2 e t1 + t2 2 2 A tour operator has a bus that can accommodate 20 tourists. (A) (B) (C) (D) (E) 96. of W and Z . What is the expected revenue of the tour operator? 63 of 100 . Let W = X + Y and Z = Y − X . independent of all other tourists.

935 950 967 976 985 Let T1 and T2 represent the lifetimes in hours of two linked components in an electronic device.(A) (B) (C) (D) (E) 97. Determine the expected value of the sum of the squares of T1 and T2 . (A) L2 3 L2 2 2 L2 3 3 L2 4 L2 (B) (C) (D) (E) 64 of 100 . The joint density function for T1 and T2 is uniform over the region defined by 0 ≤ t1 ≤ t2 ≤ L where L is a positive constant.

X3 be a random sample from a discrete distribution with probability function ⎧ ⎪ ⎪ ⎪ p ( x) = ⎨ ⎪ ⎪ ⎪ ⎩ 1 3 2 3 0 for x = 0 for x = 1 otherwise Determine the moment generating function. 19 8 t + e 27 27 1 + 2et ⎛1 2 t ⎞ ⎜ + e ⎟ ⎝3 3 ⎠ 3 (A) (B) (C) (D) (E) 1 8 + e3t 27 27 1 2 3t + e 3 3 99. Let X1. the variance of Y is 10. M(t). of Y = X1X2X3 .98. is 17. X + Y . 65 of 100 . and let Y represent the part that is paid to the hospital.000. An insurance policy pays a total medical benefit consisting of two parts for each claim. Due to increasing medical costs. The variance of X is 5000. and the variance of the total benefit.000. the company that issues the policy decides to increase X by a flat amount of 100 per claim and to increase Y by 10% per claim. X2. Let X represent the part of the benefit that is paid to the surgeon.

300 19. and let Y denote the number of extended warranties sold. 1. P(X = 0. Y = 0) = P(X = 2. or 2 luxury cars on any day. the dealer also tries to persuade the customer to buy an extended warranty for the car.670 A car dealership sells 0. Y = 0) = P(X = 1.800 19. Y = 2) = 1 6 1 12 1 6 1 12 1 3 1 6 What is the variance of X? 66 of 100 .200 18. 18. Y = 0) = P(X = 1.Calculate the variance of the total benefit after these revisions have been made. Let X denote the number of luxury cars sold in a given day. Y = 1) = P(X = 2. When selling a car. (A) (B) (C) (D) (E) 100. Y = 1) = P(X = 2.520 20.

(A) (B) (C) (D) (E) 0.47 0. The profit for a new product is given by Z = 3X – Y − 5 .58 0. X and Y are independent random variables with Var(X) = 1 and Var(Y) = 2.83 1.42 2.58 101. What is the variance of Z? (A) (B) (C) (D) (E) 1 5 7 11 16 67 of 100 .

The time until failure for each generator follows an exponential distribution with mean 10.5.4 .050 0.102. annual losses due to storm. The company will begin using the second generator immediately after the first one fails. fire.0. and theft are assumed to be independent. Determine the probability that the maximum of these losses exceeds 3. A company has two electric generators. (A) (B) (C) (D) (E) 0. exponentially distributed random variables with respective means 1.159 0.287 0. 1.414 68 of 100 . 10 20 50 100 200 In a small metropolitan area. What is the variance of the total time that the generators produce electricity? (A) (B) (C) (D) (E) 103. and 2.002 0.

0 < y < 1 otherwise. Let X and Y be continuous random variables with joint density function ⎧8 ⎪ xy f ( x. A joint density function is given by ⎧ kx f ( x.Y) ? (A) (B) (C) (D) (E) − 1 6 0 1 9 1 6 2 3 105. y ) = ⎨ 3 ⎪0 ⎩ for 0 ≤ x ≤ 1. y ) = ⎨ ⎩0 for 0 < x < 1. 69 of 100 . What is Cov(X.104. Calculate the covariance of X and Y. where k is a constant. x ≤ y ≤ 2 x otherwise.

12) . Given X = x.80 1.67 0. Y) according to this model.04 0. x).25 0. Determine Cov(X. Y is uniformly distributed on the interval (0. X is uniformly distributed on the interval (0. (A) (B) (C) (D) (E) 0 4 6 12 24 70 of 100 . 0.(A) (B) (C) (D) (E) 106.24 Let X and Y denote the values of two stocks at the end of a five-year period.

Which of the following is the density function of X for x > 0 ? (A) (B) (C) e−x/2 – e−x 2 ( e− x / 2 − e− x ) x 2e − x 2 71 of 100 . E(Y) = 7.76 11. X.4. (A) (B) (C) (D) (E) 108. and only when. t > 0 . The cost.80 9. of operating the device until failure is 2T1 + T2 .107. An actuary is using a model in which E(X) = 5.32 A device containing two key components fails when. The lifetimes. both components fail. E(Y 2) = 51. T1 and T2. E(X 2) = 27.52 12. C2). and Var(X+Y) = 8.4. 8. of these components are independent with common density function f (t) = e−t. Calculate Cov(C1. Let C1 = X+Y denote the size of the combined claims before the application of a 20% surcharge on the hospital portion of the claim. and let C2 denote the size of the combined claims after the application of that surcharge.60 9. Let X denote the size of a surgical claim and let Y denote the size of the associated hospital claim.

Annual claims are modeled by an exponential random variable with mean 1. y ) = ⎨ otherwise. A company offers earthquake insurance. What is the density function of X? (A) (B) (C) (D) (E) 110. ⎩0 72 of 100 . 1 2x +1 2 (2 x + 1)2 e− x 2e−2 x xe− x Let X and Y be continuous random variables with joint density function ⎧24 xy for 0 < x < 1 and 0 < y < 1 − x f ( x. Premiums and claims are independent. Annual premiums are modeled by an exponential random variable with mean 2. Let X denote the ratio of claims to premiums.(D) (E) e − x /2 2 e − x /3 3 109.

the company makes an initial estimate. of the amount it will pay to the claimant for the fire loss. y > 1 . When the claim is finally settled. Y. 3⎦ ⎣ (A) (B) (C) (D) (E) 1 27 2 27 1 4 1 3 4 9 111. the company pays an amount. X. determine the probability that the final settlement amount is between 1 and 3 . The company has determined that X and Y have the joint density function f ( x. Once a fire is reported to a fire insurance company.1⎤ ⎡ Calculate P ⎢Y < X X = ⎥ . Given that the initial claim estimated by the company is 2. y ) = 2 y − (2 x −1) ( x −1) x ( x − 1) 2 x > 1. to the claimant. 73 of 100 .

013 0.500 74 of 100 . what is the probability that fewer than 5% buy the supplemental policy? (A) (B) (C) (D) (E) 0. and Y the proportion of employees who purchase the supplemental policy. To purchase the supplemental policy. Let X denote the proportion of employees who purchase the basic policy. A company offers a basic life insurance policy to its employees.417 0. Given that 10% of the employees buy the basic policy. an employee must first purchase the basic policy. as well as a supplemental life insurance policy.y) = 2(x + y) on the region where the density is positive.010 0.108 0. Let X and Y have the joint density function f(x.(A) (B) (C) (D) (E) 1 9 2 9 1 3 2 3 8 9 112.

The joint probability function of X and Y is given by: P(X = 0. The policies will expire at the end of the tenth year. Y = 1) = 0. 350 385 397 870 897 A diagnostic test for the presence of a disease has two possible outcomes: 1 for disease present and 0 for disease not present.96 .125 75 of 100 . Two life insurance policies. and the probability that both of them will survive at least ten years is 0.050 P(X = 0. Y = 0) = 0. are sold to a couple. the probability that only the husband will survive at least ten years is 0. Y = 0) = 0.025. given that the husband survives at least ten years? (A) (B) (C) (D) (E) 114. What is the expected excess of premiums over claims. Let X denote the disease state of a patient.000 and a one-time premium of 500.01. one for each person.113. and let Y denote the outcome of the diagnostic test.025 P(X = 1.800 P(X = 1. Y = 1) = 0. each with a death benefit of 10. The probability that only the wife will survive at least ten years is 0.

x < y < x + 1 otherwise.20 0. (A) (B) (C) (D) (E) 115.51 0. What is the conditional variance of Y given that X = x ? (A) (B) (C) (D) (E) 1 12 7 6 x+ x2 − 1 2 1 6 1 3 x2 + x + 76 of 100 .71 The stock prices of two companies at the end of any given year are modeled with random variables X and Y that follow a distribution with joint density function ⎧ 2x f ( x. y ) = ⎨ ⎩0 for 0 < x < 1.13 0.15 0.Calculate Var(Y X = 1) . 0.

99 1. Determine the probability that the portion of a claim representing damage to the house is less than 0.15 2 0.51 0. The joint density function of X and Y is ⎧ ⎪ 6 [1 − ( x + y )] f ( x.88 0. (A) (B) (C) (D) (E) 117.84 0. 0.12 0.03 0.76 A company is reviewing tornado damage claims under a farm insurance policy.05 1 0. Let X be the portion of a claim representing damage to the house and let Y be the portion of the same claim representing damage to the rest of the property.10 3 0. An actuary determines that the annual numbers of tornadoes in counties P and Q are jointly distributed as follows: Annual number of tornadoes in county Q Annual number of tornadoes in county P 0 1 2 0 0. y ) = ⎨ ⎪0 ⎩ for x > 0.12 0. 77 of 100 .02 0.05 0. y > 0.116.2 .02 Calculate the conditional variance of the annual number of tornadoes in county Q.13 0.15 0. given that there are no tornadoes in county P.06 0. x + y < 1 otherwise.

⎩0 Let g be the marginal density function of Y.488 0. 0. y ) = ⎨ otherwise.480 0.360 0.512 0.(A) (B) (C) (D) (E) 118. Which of the following represents g? (A) ⎧15 y for 0 < y < 1 g ( y) = ⎨ otherwise ⎩0 ⎧15 y 2 for x 2 < y < x ⎪ g ( y) = ⎨ 2 ⎪0 otherwise ⎩ ⎧15 y 2 for 0 < y < 1 ⎪ g ( y) = ⎨ 2 ⎪0 otherwise ⎩ ⎧15 y 3/ 2 (1 − y1/ 2 ) for x 2 < y < x ⎪ g ( y) = ⎨ otherwise ⎪0 ⎩ ⎧15 y 3/ 2 (1 − y1/ 2 ) for 0 < y < 1 ⎪ g ( y) = ⎨ otherwise ⎪0 ⎩ (B) (C) (D) (E) 78 of 100 .520 Let X and Y be continuous random variables with joint density function ⎧15 y for x 2 ≤ y ≤ x f ( x.

X. The size of the payment for damage to the policyholder’s car. has a marginal density function of 1 for 0 < x < 1 . what is the probability that the payment for damage to the other driver’s car will be greater than 0.119.500 ? (A) (B) (C) (D) (E) 3 8 1 2 3 4 7 8 15 16 79 of 100 . An auto insurance policy will pay for damage to both the policyholder’s car and the other driver’s car in the event that the policyholder is responsible for an accident. If the policyholder is responsible for an accident. the size of the payment for damage to the other driver’s car. has conditional density of 1 for x < y < x + 1 . Given X = x. Y.

where 0 ≤ x ≤ 2. The time (in hours) to process a claim of size x. (A) (B) (C) (D) (E) 121. An insurance policy is written to cover a loss X where X has density function ⎧3 2 ⎪ x f ( x) = ⎨ 8 ⎪0 ⎩ for 0 ≤ x ≤ 2 otherwise. Let Y represent the length of time the owner has insured the automobile at the time of the accident. X and Y have joint probability density function 80 of 100 . is uniformly distributed on the interval from x to 2x. Calculate the probability that a randomly chosen claim on this policy is processed in three hours or more.58 0.17 0.32 0.120.83 Let X represent the age of an insured automobile involved in an accident. 0.25 0.

respectively. y ) = ⎨ 64 ⎪ otherwise.⎧ 1 10 − xy 2 ) for 2 ≤ x ≤ 10 and 0 ≤ y ≤ 1 ⎪ ( f ( x.9 5. ⎩0 Calculate the expected age of an insured automobile involved in an accident. The second circuit is a backup for the first.8 6. Let X and Y be the times at which the first and second circuits fail. y ) = ⎨ otherwise. (A) (B) (C) (D) (E) 122.0 6. X and Y have joint probability density function ⎧6e − x e −2 y for 0 < x < y < ∞ f ( x. 4. ⎩0 What is the expected time at which the device fails? 81 of 100 . so the second is used only when the first has failed.2 5. The device fails when and only when the second circuit fails.4 A device contains two circuits.

67 0. S is exponentially distributed with mean 5 .83 1.08 0. When N = 1.04 0.12 0. S is exponentially distributed with mean 8 .50 0.24 0. Determine P(4 < S < 8). (A) (B) (C) (D) (E) 0. When N > 1.(A) (B) (C) (D) (E) 123. 0.25 82 of 100 .33 0. the annual number of claims for a randomly selected insured: 1 2 1 P ( N = 1) = 3 1 P ( N > 1) = 6 P ( N = 0) = Let S denote the total annual claim amount for an insured.50 You are given the following information about N.

50 The distribution of Y . The marginal density of X is ⎧2 x . is uniform on the interval [0.124. (A) (B) (C) (D) 1 2 2x 1 y 1 1− y (E) 83 of 100 . given Y = y. X]. for 0 < x < 1 otherwise. f ( x) = ⎨ ⎩0. 0. Calculate the variance of Y given that X > 3 and Y > 3 . Determine the conditional density of X . f ( x. y > 0 otherwise. where positive.00 3.50 1. (A) (B) (C) (D) (E) 125. given X . y ) = ⎨ ⎩0.25 0. for x > 0. The joint probability density for X and Y is ⎧2e − ( x + 2 y ) .25 3.

29 0.126.0803 0. (A) (B) (C) (D) (E) 0. 3.000. Calculate the probability that the total payout on 200 reported losses is between 1.200.1799 0. Calculate the probability that a random policyholder will file more than three claims during a given year.000 and 1.000.000. 4. 4 .8575 84 of 100 . 1. 3. Exactly 40% of policyholders file fewer than two claims during a given year. 2. Under an insurance policy.33 127. The difference between pn and pn +1 is the same for n = 0. 1. An actuary makes the following observations: i) ii) iii) pn ≥ pn +1 for n = 0. The company covers each such loss subject to a deductible of 5. 2.8201 0.1051 0. 3. where n = 0. a maximum of five claims may be filed per year by a policyholder. 2. 5 .16 0. 1. Let pn be the probability that a policyholder files n claims during a given year. Automobile losses reported to an insurance company are independent and uniformly distributed between 0 and 20. 4 . (A) (B) (C) (D) (E) 0.27 0.14 0.000.

7% 10% 16% 25% 28% The cumulative distribution function for health care costs experienced by a policyholder is modeled by the function x − ⎧ ⎪1 − e 100 . 85 of 100 . 11% of the clients have homeowners insurance. Let G be the cumulative distribution function of reimbursements given that the reimbursement is positive. 64% of the clients have auto insurance. F ( x) = ⎨ ⎪0. Calculate the percentage of the agent’s clients that have both auto and renters insurance. Health care costs above 120 are reimbursed at 50%. The policy has a deductible of 20. but not auto insurance. An insurer reimburses the policyholder for 100% of health care costs between 20 and 120 less the deductible. The purchase of homeowners insurance and the purchase of renters insurance are mutually exclusive. An insurance agent offers his clients auto insurance. 35% of the clients have two of these three products. Calculate G(115). The profile of the agent’s clients is as follows: i) ii) iii) iv) v) 17% of the clients have none of these three products. Twice as many of the clients have homeowners insurance as have renters insurance. ⎩ for x > 0 otherwise. (A) (B) (C) (D) (E) 129. homeowners insurance and renters insurance.128.

8 86 of 100 . 0.5 25. 1 − 2t 1 for t < .5)X where X is a random variable having moment generating function 1 .9 70.683 0.757 0.777 The value of a piece of factory equipment after three years of use is 100(0. (A) (B) (C) (D) (E) 12.7 83.0 41.727 0.741 0. 2 M X (t ) = Calculate the expected value of this piece of equipment after three years of use.(A) (B) (C) (D) (E) 130.

respectively. for n1 = 1. 20% are defective.. Of the modems from Source A. 8% are defective.078 0. (A) (B) (C) (D) (E) 0. 30 coming from Source A and the remainder from Source B. The joint probability function of N1 and N 2 is ⎧ 3 ⎛ 1 ⎞ n 1−1 − n −n 1 1 ⎪ p (n1 . 2. otherwise. and n2 = 1.105 0. Of the modems from Source B. Calculate the probability that exactly two out of a random sample of five modems from the store’s inventory are defective.125 87 of 100 .102 0...010 0..131. 3. 3.. (A) 3 2 ( e − 1) 16 3 2 e 16 3e 4−e (B) (C) (D) (E) e2 − 1 e2 132. Calculate the expected number of claims that will be submitted to the company in May if exactly 2 claims were submitted in April.. 2. ⎩ ( ) n 2 −1 . Let N1 and N 2 represent the numbers of claims submitted to a life insurance company in April and May. A store has 80 modems in its inventory. n2 ) = ⎨ 4 ⎜ 4 ⎟ e 1 − e ⎝ ⎠ ⎪0.

12 0. (A) (B) (C) (D) (E) 0.80 0.1t F (t ) = ⎨ ⎪1 − e 1000 . Records also indicate that three times as many king-size mattresses are sold as twin-size mattresses.95 88 of 100 .85 0.15 0. for t > 0. in years. The length of lifetime. The policy will pay 5000 only if he dies before his 50th birthday and will pay 0 otherwise. A mattress store sells only king. ⎩ Calculate the expected payment to the man under this policy. A man purchases a life insurance policy on his 40th birthday. queen and twin-size mattresses. of a male born the same year as the insured has the cumulative distribution function for t ≤ 0 ⎧ 0. (A) (B) (C) (D) (E) 333 348 421 549 574 134. ⎪ 1−1. Calculate the probability that the next mattress sold is either king or queen-size. Sales records at the store indicate that one-fourth as many queen-size mattresses are sold as king and twinsize mattresses combined.133.

Let X be the number of rolls needed to obtain a 5 and Y the number of rolls needed to obtain a 6. A fair die is rolled repeatedly. N.0 6. and is uniformly distributed on the interval [0.2 6.8 89 of 100 .0 5.25 136. Calculate Var (N).50 2. The number of workplace injuries.75 1. Calculate E ( X Y = 2) . (A) (B) (C) (D) (E) 5.6 6.135. The parameter λ is a random variable that is determined by the level of activity in the factory. 3]. (A) (B) (C) (D) (E) λ 2λ 0. occurring in a factory on any given day is Poisson distributed with mean λ.

50 0.09e −2t + 0.67 0. (A) (B) (C) (D) (E) 0.137. for − ∞ < t < ∞.34 + 0. Calculate P[X ≤ 0]. Let X and Y be identically distributed independent random variables such that the moment generating function of X +Y is M (t ) = 0.09e 2t .70 90 of 100 .24e t + 0.34 0.33 0.24e −t + 0.

x + y < 10 otherwise. ⎩ for x > 0.7 91 of 100 . Calculate the expected operational time of the machine.7 2. f ( x.0 6.3 5. (A) (B) (C) (D) (E) 1. whose lifetimes have the joint density function ⎧1 ⎪ . The machine operates until both components fail.138.5 3. A machine consists of two components. y ) = ⎨ 50 ⎪0. y > 0.

534 0. Calculate the mode of the number of hurricanes it takes for the home to experience damage from two hurricanes. the loss is uniformly distributed on [0. a new home has a 0.510 0.600 0. When two hospitalizations occur. the losses are independent. (A) (B) (C) (D) (E) 2 3 4 5 6 92 of 100 . Calculate the expected number of people in the car who are hospitalized.628 0. Each of them independently has probability 0.139.3 of being hospitalized. 1].800 140. The occurrences of damage in different hurricanes are independent. When a hospitalization occurs. A driver and a passenger are in a car accident. (A) (B) (C) (D) (E) 0.4 probability of experiencing damage. given that the total loss due to hospitalizations from the accident is less than 1. Each time a hurricane arrives.

A1 A6 A11 A16 A21 A26 A2 A7 A12 A17 A22 A27 A3 A8 A13 A18 A23 A28 A4 A9 A14 A19 A24 A29 A5 A10 A15 A20 A25 A30 Calculate the number of ways to form a set of three distinct items such that no two of the selected items are in the same row or same column. (A) (B) (C) (D) (E) 200 760 1200 4560 7200 93 of 100 .141. Thirty items are arranged in a 6-by-5 array as shown.

Calculate the expected bonus payment from the insurer to the 1000 policyholders in one year.000 94 of 100 . In each month.000 60.142. 400 are classified as lowrisk drivers and 600 are classified as high-risk drivers.400 51. if a policyholder does not have an accident.80 and the probability of zero accidents for low-risk drivers is 0.00 cash-back bonus from the insurer.90. In each month.000 54. he or she will receive a 5.000 50. Among the 1. (A) (B) (C) (D) (E) 48. the probability of zero accidents for high-risk drivers is 0. An auto insurance company is implementing a new bonus system.000 policyholders of the auto insurance company.

860 0. The probability that a member of a certain class of homeowners with liability and property coverage will file a liability claim is 0.870 0. (A) (B) (C) (D) (E) 0. and the probability that a member of this class will file a property claim is 0.01. Calculate the probability that a randomly selected member of this class of homeowners will not file a claim of either type.143. The probability that a member of this class will file a liability claim but not a property claim is 0.04.10.890 95 of 100 .850 0.864 0.

y > 0 otherwise. ⎩ for x > 0. A client spends X minutes in an insurance agent’s waiting room and Y minutes meeting with the agent. y ) = ⎨ ⎪ ⎪0. The joint density function of X and Y can be modeled by ⎧ 1 −x −y e 40 e 20 .144. ⎪ ⎪ 800 f ( x. Which of the following expressions represents the probability that a client spends less than 60 minutes at the agent’s office? (A) 1 800 ∫ 0 1 800 ∫ 0 1 800 40 20 ∫e 0 − x 40 e − y 20 dydx 40 20 − x (B) ∫ 0 e − x 40 e − y 20 dydx 20 40 − x (C) ∫ ∫ 0 0 e − x 40 e − y 20 dydx (D) 1 800 ∫ 0 1 800 ∫ 0 60 60 ∫e 0 − x 40 e − y 20 dydx 60 60 − x (E) ∫ 0 e − x 40 e − y 20 dydx 96 of 100 .

An actuary uses the following density function to model the joint distribution of the proportion X of state employees who will choose Dental Option 1 and the proportion Y who will choose Medical Option 1 under the new plan options: ⎧0.061 0. New dental and medical plan options will be offered to state employees next year.5 and 0.5 and 0. ⎩ for for for for 0 < x < 0.083 0.5 < y < 1 and 0 < y < 0.076 0. y ) = ⎨ ⎪1. (A) (B) (C) (D) (E) 0.75.25.5 < x < 1 and 0 < y < 0.000 0. ⎪ f ( x.75).50.5 0.145.5 0 < x < 0.5 < x < 1 0. ⎪1.5 < y < 1 Calculate Var (Y | X = 0. ⎪ 0.141 97 of 100 .50.

and ABC.146. none watched CBS. ABC or HGTV). 7 watched CBS and NBC. NBC. NBC. 18 watched HGTV and of these. (A) (B) (C) (D) (E) 1 37 45 55 82 98 of 100 . or ABC. Calculate how many of the 100 TV watchers did not watch any of the four channels (CBS. 10 watched ABC. 15 watched NBC. NBC. 5 watched NBC and ABC. 6 watched CBS and ABC. A survey of 100 TV watchers revealed that over the last year: i) ii) iii) iv) v) vi) vii) viii) 34 watched CBS. 4 watched CBS.

(A) (B) (C) (D) (E) 4. (A) (B) (C) (D) (E) 1% 5% 10% 20% 25% 148.000 20.000 8. The amount of a claim that a car insurance company pays out follows an exponential distribution. Each hurricane results in a loss that is exponentially distributed with mean 1000.000. Calculate the variance of the total loss due to hurricanes hitting this house in the next ten years. The number of hurricanes that will hit a certain house in the next ten years is Poisson distributed with mean 4. Losses are mutually independent and independent of the number of hurricanes.000.004. the insurance company reduces the expected claim payment by 10%. By imposing a deductible of d.000 4. Calculate the percentage reduction on the variance of the claim payment.000 99 of 100 .000 16.147.000.000.

A motorist makes three driving errors.0432 0.25.149. (A) (B) (C) (D) (E) 0.4116 100 of 100 .2520 0. Losses are mutually independent and independent of the number of accidents. each independently resulting in an accident with probability 0. Calculate the variance of the total unreimbursed loss the motorist experiences due to accidents resulting from these driving errors.1782 0.80. The motorist’s insurer reimburses 70% of each loss due to an accident. Each accident results in a loss that is exponentially distributed with mean 0.0756 0.

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