Good evening all,
I was hoping whether somebody could help me with this question. For convenience, I write the question here:
A compound distribution S is such that P(N=0) = 0.6, P(N=1) = 0.3 and P(N=2) = 0.1. Claim numbers are either 1 unit or 2 units, each with probability 0.5. Derive the distribution function of S
I have two main problems with this question.
The solution given for this question states that the aggregate claim amount S can take the values 0,1,2,3 or 4
(a) How are you able to tell from the question that the aggregate claim amount takes ONLY 0,1,2,3 or 4? Why is it unable to take any bigger value?
(b) For P(S less than or equal to 3) = P(S less than or equal to 3) + 0.1 x 2 x 0.5^2
I am having trouble obtaining the second part of this equation. Could somebody please explain how this is obtained?
Any help would be much appreciated.
I was hoping whether somebody could help me with this question. For convenience, I write the question here:
A compound distribution S is such that P(N=0) = 0.6, P(N=1) = 0.3 and P(N=2) = 0.1. Claim numbers are either 1 unit or 2 units, each with probability 0.5. Derive the distribution function of S
I have two main problems with this question.
The solution given for this question states that the aggregate claim amount S can take the values 0,1,2,3 or 4
(a) How are you able to tell from the question that the aggregate claim amount takes ONLY 0,1,2,3 or 4? Why is it unable to take any bigger value?
(b) For P(S less than or equal to 3) = P(S less than or equal to 3) + 0.1 x 2 x 0.5^2
I am having trouble obtaining the second part of this equation. Could somebody please explain how this is obtained?
Any help would be much appreciated.