Econ 506, Section M
NAME:_
SOLUTION_
_____
Quiz 2A, Sept. 30, 2010
Total points: 50
I.
(
8 points)
if 25 percent of the balls in a certain box are red, and if 15 balls are selected
from the box at random, with replacement, what is the probability that at least one red balls
will be obtained?
Assume Y = # of red balls obtained in 15 selection. Then Y has Binomial distribution
with p
=
.25, n
=
15.
98663654
.
0
01336346
.
0
1
)
1
(
0
15
1
)
0
(
1
)
1
(
0
15
0
=

=


=
=

=
≥

p
p
Y
P
Y
P
II. (10 points)
accident records collected by an automobile insurance company give the
following information. The probability that an insured driver has automobile accidents is
0.15. If an accident has occurred, the damage to the vehicle amounts to 20% of its market
value with a probability of 0.8, to 60% of its market value with a probability of 0.12, and
to a total loss with a probability of 0.08. What premium should the company charge on a
$12,000 car so that the expected gain by the company is zero? Complete the following
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 Fall '08
 Staff
 Normal Distribution, Probability distribution, Probability theory, probability density function, Cumulative distribution function

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