Question 2 (10 points) An automobile insurance company divides customers into th

Question

Question 2 (10 points) An automobile insurance company divides customers into three categories, good risks, medium risks, and poor risks. Assume that 70% of the customers are good risks, 20% are medium risks, and 10% are poor risks. Assume that during the course of a year, a good risk customer has probability 0.005 of filing an accident claim, a medium risk customer has probability 0.01, and a poor risk customer has probability 0.025. A customer is chosen at random a. What is-the probability that the customer is A good yisk andhas fileda claim? c. Given th r is Given the customer is a medium risk customer, what is the probability that he/she has filed a claim. d.

Explanation / Answer

P(good risk customer) = 0.7

P(medium risk customer) = 0.2

P(poor risk customer) = 0.1

P(filling a claim | good risk customer) = 0.005

P(filling a claim | poor risk customer) = 0.025

P(filling a claim | medium risk customer) = 0.01 (ans)

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