Statistics for Decision- Making in Business - Maricopa Community ...

that this situation will result in an accident. Find the expected payout for Geico and
comment on its profitability in a situation like this. (Video Solution)
3. An insurance policy pays $100 per day for up to 3 days of hospitalization and $50 per
day for each day of hospitalization thereafter. (Video Solution)
The number of days of hospitalization, , is a random variable with probability given by
the function
( ) {
a. Define the random variable.
b. Give the probability distribution for by using a probability histogram.
c. What does the probability histogram tell you about hospitalization
d. Determine the expected payment for hospitalization under this policy.
(SOURCE: Society of Actuaries (SOA), Spring 2003 Exam P, #36)
4. You work on a dairy farm and are in charge of quality control for eggs. Your primary
concern is that broken eggs do not go out. You know from past experience that about
25% of the outgoing boxes contain one or more broken eggs (based on complaints). If a
local restaurant purchases 4 boxes of eggs from you, what is the expected number of
boxes with broken eggs that this vendor should receive (Video Solution)
5. At a major seafood restaurant, shrimp fettuccini is a popular dish. The company is
considering adding a family-sized fettuccini dish, but would first like to make sure that it
will be a profitable endeavor. The company randomly surveys customers that who
purchase the original $14.99 dish and finds that 15% would purchase the larger family
dish. What should they charge for the family-sized dish so that average revenue from
shrimp fettuccini will be $17.00 (Video Solution)
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