00:01
In this question, we're given an insurance company uses the following assumptions to price its tornado insurance.
00:07
In any calendar year, there can be at most one tornado.
00:12
So that means in any year, there's only two outcomes.
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Either there's a tornado or there isn't a tornado.
00:19
And probability of a tornado in a year will be 0 .09.
00:24
And the number of tornadoes in a year is independent of the other years.
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So i'm going to let x be the number of tornadoes in a year.
00:31
Given 20 year period.
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Now x follows the binomial distribution.
00:36
You can see there are four criteria here.
00:38
The first criteria, the number of trials, n is fixed and are identical.
00:42
So since it's a 20 year period, there will be 20 trials, so n is equal to 20.
00:47
Now, each trial is taking a look at that year, whether there's a tornado or not.
00:52
So the 20 trials are identical.
00:55
So first criteria is fulfilled.
00:57
Second criteria, each trial is independent.
00:59
So that is each year, the number of tornado is independent of the other years.
01:04
So the second criteria is fulfilled.
01:07
The criteria, each trial results in one or two outcomes, success and failure.
01:10
So you can see that in each trial, that's in each year, you can see that there are two outcomes, either there is a tornado or no tornado...