#No5 please help me solve no5 thanks ~ Suppose an insurance company classifies d
ID: 3225091 • Letter: #
Question
#No5 please help me solve no5 thanks ~
Suppose an insurance company classifies drivers into three classes: low risk, average risk, and high risk. Records indicate that the probabilities that low, average, and high risk drivers will have an accident over a 1-year period are, respectively 0.05, 0.15, and 0.30. If 20 percent of the population consists of low risk drivers, 50 percent are average risk drivers, and 30 percent are high risk drivers, what proportion of drivers have an accident in any one-year period? Assume driver A had no accident in 2007. Using the data given in problem 4, what is the probability that driver A is a low risk driver?Explanation / Answer
5) Here, we need to find the probability of driver being of low risk category, given that the driver had no accident
P(low risk | no accident) = P(low risk and no accident)/P(no accident)
= 20(1-0.05) / [(20(1-0.05) + 50(1-0.15) + 30(1-0.3)]
= 0.2303
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