What is the expected payout if d is equal to one

Reference no: EM131001319

1. For a certain insurer, N has a Poisson distribution, and X is exponentially distributed. Each claim is subject to a deductible of d. If d = 2, the expected amount paid by the insurer is equal to 100. If d = 3, this expected payout reduces to 50. What is the expected payout if d = 1?

2. The density function of X is given by

f (x) = 10 - x , 0 ≤ x ≤ 10.

In order to reduce the expected amount paid, the insurer is considering two possibilities. One is to introduce a deductible of two per claim. The other is to pay only a maximum of 7 per claim. Which scheme should they adopt if they want to minimize the expected payout?

Reference no: EM131001319

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