Question
Suppose that you are selling auto insurance to a customer for two vehicles, a car and a motorcycle. By your estimate you know the following:
Suppose that you are selling auto insurance to a customer for two vehicles, a car and a motorcycle.
By your estimate you know the following:
An accident involving the car will cost $8,000 in repairs.
An accident involving the motorcycle will cost $2,000 in repairs.
The probability of a car accident is 0.03
The probaiblity of a motorcycle accident is 0.07
The probability that both vehicles are involved in accidents is 0.01.
Let X be the random loss amount (in dollars) from the car and Y be the loss amount from the
motorcycle.
(a) Fill in the joint and marginal distribution table.
(b) What should the price of your policy be if you want it to be exactly $100 more than the expected
total repair cost?
(c) If the car is involved in an accident, what is the probability the motorcycle will be involved in
an accident? Leave your answer as a fraction.
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