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a company has purchased a policy that will compensate for the loss of revenue due to severe weather events. the policy pays 1000 for each severe weather event in a year after the first two such events in that year. the number of severe weather events per year has a poisson distribution with mean 1. calculate the expected amount paid to this company in one year.

Sagot :

The standard deviation,    A = -1  is  the expected amount paid to this company in one year.

What is standard deviation?

  • The variability in your dataset is measured by its standard deviation.
  • It reveals the average deviation between each result and the mean.
  • A low standard deviation denotes that values are grouped closely to the mean, while a large standard deviation denotes that values are often spread widely from the mean.

The required payment random variable is given by

                      1000(x - 2 )

where x posses poison distribution with mean 1.

the expected value to be paid in the one year is given by

         = 1000 ∑x=3  ( x - 2 ) e!/x!

         = 1000 ( ∞∑ x= 0 ( x- 2 ) e⁻¹/x!  - 2∑x = 0 ( x - 2 ) e⁻¹/x!

          = 1000 ( A - B )

the expected value to be paid in the one year is given by

         = 1000 ∑x=3  ( x - 2 ) e!/x!

         = 1000 ( ∞∑ x= 0 ( x- 2 ) e⁻¹/x!  - 2∑x = 0 ( x - 2 ) e⁻¹/x!

            P ( K=x )  = e⁻¹/x!

 so

                 ∑ x=0 x p( k = x )  =  ∞∑x = 0 x e⁻¹/x! = 1

      and              ∞∑x = 0 e⁻¹/x! = 1

∵                      A = ∞∑X = 0 (x - 2 )e⁻¹/x!

                         A  =   1 - 2 * 1

                            A = -1

Learn more about standard deviation

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