There is a portfolio of 120 risks in a year.One risk has maximum one event . The probability of occurence of an event is .02. The number of claims follow geometric distribution with mean 0.4 given an event. Find the mean and variance of the distribution of number of claims in a year.
It sounds to me like we're not given enough information to get to a definitive answer here, so there are a few options open to us. But we can make some reasonably "standard" assumptions and come up with a solution. Can you see what assumption(s) you need to make in order to turn this into a standard problem in shape of the individual risk model?
Find the mean of geometric distribution and multiply that with mean of Bernoulli that will give you mean claim number of one risk and then multiply that with total risks numbers so you get mean of portfolio.
