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Department of Civil Engineering: Assignment - 1
Department of Civil Engineering: Assignment - 1
ASSIGNMENT -1
2) An insurance company believes that people can be divided into two classes- those
that are accident prone and those that are not. Their statistics show that an accident-
prone person will have an accident at some time within a fixed 1-year period with
probability .4, whereas this probability decreases to .2 for a non-accident-prone person.
If we assume that 30 percent of the population is accident prone, what is the
probability that a new policy holder will have an accident within a year of purchasing a
policy?
Solution: Let, A be the event that the policy holder is accident prone and B be the
event that the policy holder will have an accident within a year of purchase.
So, we get,
P(A) = 0.3
P(AC) = 1-0.3= 0.7
P(B|A) = 0.4
P(B|AC) = 0.2
The desired probability, P(B) = P(A)*P(B|A)+P(AC)*P(B|AC)
= 0.3*0.4+0.2*0.7
= 0.26
Hence, there is a 26 percent that the new policy holder will have an accident within a
year of purchasing a policy (Ans.)
= (Ans.)