Exam MAS-I Practice Question 6
Study guide: Exam MAS-I
Claims are reported to an insurer as a Poisson process at a rate of 10 per year. Independently of everything else, each claim is closed without payment with probability 0.3; otherwise the payment is exponential with mean 2,000.
Let S be the total amount paid on claims reported during one year. Calculate \text{Var}(S).
- A) Less than 25,000,000
- B) At least 25,000,000, but less than 32,000,000
- C) At least 32,000,000, but less than 45,000,000
- D) At least 45,000,000, but less than 70,000,000
- E) At least 70,000,000
Answer this question and see the worked solution