SOA Exam FAM Sample Question 15
Study guide: Exam FAM
Computer maintenance costs for a department are modeled as follows:
(i) The distribution of the number of maintenance calls each machine will need in a year is Poisson with mean 3.
(ii) The cost for a maintenance call has mean 80 and standard deviation 200.
(iii) The number of maintenance calls and the costs of the maintenance calls are all mutually independent.
The department must buy a maintenance contract to cover repairs if there is at least a 10% probability that aggregate maintenance costs in a given year will exceed 120% of the expected costs.
Calculate the minimum number of computers needed to avoid purchasing a maintenance contract using the normal approximation for the distribution of the aggregate maintenance costs.
- A) 80
- B) 90
- C) 100
- D) 110
- E) 120
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