The amount of a claim paid by an insurer on a particular policy is a continuous random variable with pdf $f(x) = 4x^3$ for $0 < x < 1$. The insurer has three independent policies of this type. Determine the variance of the second largest of the three independent claims. (A) 0.0120 (B) 0.0125 (C) 0.0130 (D) 0.0135 (E) 0.0140
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The CDF is given by F(x) = ∫[0,x] 4t^3 dt = t^4 evaluated from 0 to x = x^4 for 0 < x < 1. Show more…
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