Question

(10 points) An insurance company places its policyholders into one of two categories when the policy renews: High risk (H) or low risk (L). A driver is a high risk if he/she has received tickets within the last past 12 months, and is low risk if he/she had no ticket. Based on such a company data, a driver that is currently high risk has 82% chance of being high risk again when the policy renews (18% of being moved to low risk). On the other hand, a low risk driver has a 18% chance of being moved to high risk. 1. Find the transition matrix describing this situation. ( State vector should be in this order [H, L]. Enter each answer as a decimal number instead of a percentage. ). 2. What is the probability that a high risk driver remains at high risk after renewing his/her policy 3 times? Such a probability is

          (10 points) An insurance company places its policyholders into one of two categories when the policy renews: High risk (H) or low risk (L). A driver is a high risk if he/she has received tickets within the last past 12 months, and is low risk if he/she had no ticket. Based on such a company data, a driver that is currently high risk has 82% chance of being high risk again when the policy renews (18% of being moved to low risk). On the other hand, a low risk driver has a 18% chance of being moved to high risk.

1. Find the transition matrix describing this situation.

( State vector should be in this order [H, L]. Enter each answer as a decimal number instead of a percentage. ).

2. What is the probability that a high risk driver remains at high risk after renewing his/her policy 3 times? Such a probability is

(10 points) An insurance company places its policyholders into one of two categories when the policy renews: High risk (H) or low risk (L). A driver is a high risk if he/she has received tickets within the last past 12 months, and is low risk if he/she had no ticket. Based on such a company data, a driver that is currently high risk has 82% chance of being high risk again when the policy renews (18% of being moved to low risk). On the other hand, a low risk driver has a 18% chance of being moved to high risk.

1. Find the transition matrix describing this situation.

( State vector should be in this order [H, L]. Enter each answer as a decimal number instead of a percentage. ).

2. What is the probability that a high risk driver remains at high risk after renewing his/her policy 3 times? Such a probability is

Added by Mark P.

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