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RMI 2101 Risk Management and Insurance Analysis

An assignment in risk management and insurance, focusing on analysis and decision-making processes.

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    RMI 2101 Risk Management and Insurance Analysis RMI 2101 Sections 003 and 005 S PRING 2013 H OMEWORK A SSIGNMENT 5 3 0 Points D UE ON F RIDAY , M ARCH 8 , 2013 AT THE BEGINNING OF CLASS Be careful to follow the Guidelines for Homework Document located in the Course Documents Section of Blackboard . You will lose points for not following proper format . Although this assignment does not have to be typed , you sho uld submit it on 8 ½ x 11 paper. No torn - out pages from a spiral notebook will be accepted . Be sure you follow other guidelines contained in the Guidelines for Homework Document . 1. The Civil Air Patrol (CAP) owns airplanes used for search and rescue missions. In the course of their activities, CAP sustains losses in the form of property damages to their airplanes. Assume that the CAP covers two major regions in PA – the Northeast (NE) and the Southwest (SW) . Assume that the following information is based on the past 1 0 years of data and you are projecting for the year 201 4 . The CAP has the following data for the number of accidents per airplane in the NE Region . # of accidents per airplane per year Probability of having this # of accidents 0 .60 1 .2 5 2 .10 3 ? a. What is the random variable illustrated here? (2 points)

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    The random variable illustrated here is the number of accidents per airplane per year in the NE Region. It represents the number of accidents that an airplane might experience over a given year. b. What is the probability of an airplane having 3 accidents in a year? (2 points) To find the probability of an airplane having 3 accidents, we need to ensure that the total probability of all possible outcomes sums to 1. We are given the probabilities for 0, 1, and 2 accidents, but the probability for 3 accidents is missing. Given the probabilities for 0, 1, and 2 accidents: • Probability of 0 accidents: 0.60 • Probability of 1 accident: 0.25 • Probability of 2 accidents: 0.10 Therefore, the probability of an airplane having 3 accidents in a year is 0.05 . c. C alculate the expected number of accidents per airplane per year for the NE Region. What a re the units of measurement ? (3 points)

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