You plan to purchase dental insurance for your three remaining years in school. The insurance makes a

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You plan to purchase dental insurance for your three remaining years in school. The insurance makes a one-time payment of $1,000 in case of a major dental repair (such as an implant) or $100 in case of a minor repair (such as a cavity). If you don’t need dental repair over the next 3 years, the insurance expires and you receive no payout. You estimate the chances of requiring a major repair over the next 3 years as 5%, a minor repair as 60% and no repair as 35%.

a. Why is X = payout of dental insurance a random variable?
b. Is X discrete or continuous? What are its possible values?
c. Give the probability distribution of X.

Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most...
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Statistics The Art And Science Of Learning From Data

ISBN: 9780321997838

4th Edition

Authors: Alan Agresti, Christine A. Franklin, Bernhard Klingenberg

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