# 3, 25 pts An insurance company believes that people can be divided into two cl
ID: 3310600 • Letter: #
Question
# 3, 25 pts An insurance company believes that people can be divided into two classes those that are accident prone and those that are not. Their statistics show that an accident-p this probability decreases to .2 for a non-accident-prone person. If we of the population is accident prone, rone person assume that 30 percent 1. what is the probability that a new policy holder will have an accident within a year of will have an acident at some time within a fixed 1-year period with probability 4, whereas purchasing a policy? 2Explanation / Answer
1)
Required probability = P(the policyholder would have an accident within 1 year of purchasing the policy)
= P(the policyholder would have an accident within 1 year of purchasing the policy and he is accident prone person) + P(the policyholder would have an accident within 1 year of purchasing the policy and he is not an accident prone person)
= P(the policyholder would have an accident within 1 year of purchasing the policy given that he is accident prone person).P(he is an accident prone person) + P(the policyholder would have an accident within 1 year of purchasing the policy given that he is not an accident prone person).P(he is not an accident prone person)
= (0.40)(0.30) + (0.20)(0.70)
= 0.12 + 0.14
= 0.26
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