Find probability distribution of extra insurance payments

Reference no: EM132171403

Question: You recently received a traffic ticket for a serious moving violation. If you have an accident or receive another moving violation within the next 3 years, you will become part of the "assigned risk" pool and will pay an extra $500 per year for insurance. If the probability of an accident or moving violation is 20% per year, what is the probability distribution of your "extra" insurance payments over the next 4 years? Assume that insurance is purchased annually and that violations register at the end of the year-just in time to affect next year's insurance premium.

Reference no: EM132171403

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