An individual who has automobile insurance from a certain company is randomly selected. Let Y be the number of moving violations for which the individual was cited during the last 3 years. The pmf of Y is as follows: y 0 1 2 3 p(y) 0.50 0.20 0.25 0.05 (b) Suppose an individual with Y violations incurs a surcharge of $80Y^2. Calculate the expected amount of the surcharge.
Added by Nathan S.
Step 1
This is done by multiplying each possible value of Y^2 by its corresponding probability and then summing these products. So, E(Y^2) = (0^2 * 0.50) + (1^2 * 0.20) + (2^2 * 0.25) + (3^2 * 0.05) = 0 + 0.20 + 1.00 + 0.45 = 1.65. Show more…
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