TIA Practice Exam 3 #24
Hello I think I am misunderstanding how to organize the payment structure for this problem. I hope someone could help me out.
N= # of Losses ~Poisson(lamda=2.5)
Y= Payment
Goal : E(Y)
I understand there are 2 blocks of payments; first block is a constant 5000; the second block varies; so in this case for the first loss we have (5000(for block 1) and 5000(for block 2) representing the 10000 in total for the first loss, the second loss we have (5000 for (block 1) , 2500 for (block 2))representing the 7500 in total for the second loss etc.
Q: So how do we use those terms representing the 2 blocks of payments regarding to the expectation?
Any help would be greatly appreciated. Thank you very much.
Last edited by RobertR1990; 09182016 at 11:22 AM..
