Exam P Practice Problem 74 – Review of Auto Insurance Claims

Both Problem 74-A and Problem 74-B use the following information.

An insurer issued policies to cover a large number of automobiles. Claim amounts (in thousands) from these policies are independent and are modeled by a continuous uniform distribution on (0,10).

The insurer randomly selects five claims for review.

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Problem 74-A

What is the probability that the minimum claim amount is between 2 thousands and 6 thousands?

\text{ }

      \displaystyle (A) \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 0.31

      \displaystyle (B) \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 0.32

      \displaystyle (C) \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 0.33

      \displaystyle (D) \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 0.34

      \displaystyle (E) \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 0.75

\text{ }

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\text{ }

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Problem 74-B

What is the expected value of the maximum claim amount?

\text{ }

      \displaystyle (A) \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 5.0

      \displaystyle (B) \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 5.5

      \displaystyle (C) \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 7.6

      \displaystyle (D) \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 8.3

      \displaystyle (E) \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 8.5

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\copyright \ 2013 \ \ \text{Dan Ma}

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