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SE4 Condensed
SE4 Condensed
Take this practice exam under strict exam conditions: Set a timer for 3 hours; Do not stop the timer
for restroom breaks; Do not look at your notes. If you believe a question is defective or poorly worded,
you must continue on just like during the real exam.
2. X and Y are uniformly chosen over pairs of integers with 1 ≤ X ≤ Y ≤ 3. Find P[X + Y ≤ 4].
1 2 3 4 5
A. B. C. D. E.
6 6 6 6 6
3. Suppose that X is a Poisson random variable with mean 2.5 and Y is a geometric random variable on
1, 2 . . . with mean 2.5. Let P denote the probability that X is equal to its mode, and let Q denote the
probability that Y is equal to its mode. Find |P − Q|.
5. An actuary for an insurance company models annual claims with a lognormal random variable X. If
E ln X = 1.08 and Var ln X = .25, what is P[X < 1]?
6. Suppose that X is an exponential random variable with mean 2 and Y = |2X − 3|. Find fY (1).
7. An insurance company sells exactly 3 types of insurance: fire, auto, and flood insurance. Suppose
that every customer who buys flood insurance also buys fire insurance, 20% of the customers buy fire
and auto insurance, 40% of customers who buy fire insurance also buy flood insurance, and 25% of
customers who buy auto insurance also buy fire insurance. What is the probability that a randomly
chosen customer buys flood insurance?
Suppose that a customer has a deductible of 20. Find the probability that the insurance company’s
payment exceeds 10 given that the loss is less than 50.
12. The number of accidents that occur in a small town in a year satisfy P[N = 0] = p0 , P[N = 1] = p1 ,
and for n ≥ 1, P[N = n + 1] = P [N = n]/2. If EN = 1/3, what is P[N = 0]?
1 2 3 4 5
A. B. C. D. E.
6 6 6 6 6
13. An insurance company with 500,000 customers observes that the probability of a customer filing a claim
in a given year is 2%. If the customers file claims independently of each other, find the coefficient of
variation of the number of claims that are filed in a year.
14. An insurance company sells 5,000 policies, each with a premium of $110. Each policy will pay $10,000
with probability 1%, and 0 with probability 99%, independently of the other policies. What is the
approximate probability that the total payments on these 5,000 policies will exceed the total premiums?
15. Let X and Y be random variables whose joint density is proportional to xy + xy 2 for 0 ≤ x ≤ 1,
0 ≤ y ≤ 1, and 0 otherwise. Find EY .
7 10 3 7 3
A. B. C. D. E.
24 24 5 10 4
17. Suppose
2
that X and Y are jointly normal random variables, with EX = 1, VarX = 4, and EY = −2,
E Y = 5. If the correlation of X and Y is −1/2, what is the probability that the sum of X and Y
is positive?
18. Light bulbs for my living room lamp appear to have a random lifetime that is exponentially distributed
with mean 2 weeks. If I replace a light immediately when it burns out, what is the probability that I
will use up at least 3 light bulbs within the next 5 weeks?
19. An insurance company feels that the damage that its customers receive has density 3x2 /64 for 0 ≤
x ≤ 4, and 0 otherwise. Currently, the policy has a deductible of 1. If the insurance company adds a
payment limit of 2, how much money can they expect to save per customer?
20. The number of hurricanes per month is approximately Poisson distributed, with mean 2 in August, 3
in September, and 1 in October. Assuming that the number of hurricanes in each of the months are
inependent, what is the probability that there will be no more than 3 total hurricanes during this 3
month period?
22. Suppose that X and Y are independent random variables with common density f (x) = 2e−2x . Find
P[X < 1 | X + Y < 2].
4 3 2 8 3
A. B. C. D. E.
15 10 5 15 5
24. I have two urns, one of which contains 3 blue balls and 7 red balls, and the other contains 7 blue balls
and 3 red balls. Suppose that I randomly select an urn and then randomly draw two balls from the
urn without replacement. If both are blue, what is the probability that a ball chosen uniformly from
the other urn is also blue?
25. Suppose that X and Y are uniformly distributed on the set 0 ≤ X ≤ 4, 0 ≤ Y ≤ 4 and X + Y ≥ 1,
and let Z = XY . Find P[Z < 4].
27. Let X and Y be independent continuous uniform random variables, each on the interval (0, 2). If
Z = X + Y and W = X − Y , find E[W Z].
A. −2 B. 0 C. 1 D. 2 E. 4
28. If the joint density of X and Y is xe−x(y+1) for x, y > 0, what is the expected value of X?
A. 1 B. 2 C. e2 D. 2e2 E. 1 + e2
2 · 42
f (x) =
(x + 4)3
and that claims will experience inflation of 5% next year. What is the probability that the claim from
a randomly chosen customer next year will be greater than 2?
(1) C
(2) D
(3) B
(4) D
(5) A
(6) E
(7) A
(8) C
(9) C
(10) B
(11) E
(12) E
(13) A
(14) B
(15) D
(16) D
(17) B
(18) B
(19) B
(20) B
(21) A
(22) D
(23) B
(24) C
(25) E
(26) A
(27) B
(28) A
(29) A
(30) B