Case 1: Probabilities cannot add up to a number greater (or less) than 1. This would mean there is greater than a 100% chance of something happening which just doesn't make sense. 0.4 + 0.4 + 0.3 = 1,1
Case 2: You cannot have a negative probability. That is claiming that there is a -10% chance of an event happening, there is at the very least a 0%. Despite them "adding" up to 1, the negative probability makes no sense.
Hope I helped!
Answer:
The question is about the least amount to charge each policyholder as premium
The least premium is $484
Step-by-step explanation:
The least amount of premium to charge for this policy is the sum of the expected values of outcome of both instances of policyholder dying before the age of 70 and living after the age of 70 years
expected value of dying before 70 years=payout*probability=$24,200*2%=$484
Expected of living after 70=payout*probability=$0*98%=$0
sum of expected values=$484+$0=$484
Note that payout is nil if policyholder lives beyond 70 years
The premium of $573 means that a profit of $89 is recorded
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Answer:
The answer is A(-3,-4) B(-1,2) C(2,1) D(0,-5)
Step-by-step explanation:
They will be greater for both of these answers because 5 is a larger number than -2 and -2 is a larger number than -5 and it comes before -5 on the number line
