Independent solution

How to solve this Compound Uniform Distribution question

Setup

Setup

Condition on whether the claim count is zero, one, or two. These are the only count values with positive probability.

Pr(S48N=0)=1,Pr(S48N=1)=4860=0.8\Pr(S\le48\mid N=0)=1,\quad \Pr(S\le48\mid N=1)=\frac{48}{60}=0.8

Model

Model

With no claim the total is automatically within the limit. With one uniform claim the conditional probability is 0.8. With two claims, the qualifying region is a right triangle occupying 0.32 of the square support.

Pr(S48N=2)=12(4860)2=0.32\Pr(S\le48\mid N=2)=\frac12\left(\frac{48}{60}\right)^2=0.32

Compute

Compute

Weight the three conditional probabilities by the count probabilities. The contributions are 0.70, 0.16, and 0.032, totaling 0.892.

Pr(S48)=0.7+0.2(0.8)+0.1(0.32)=0.892\Pr(S\le48)=0.7+0.2(0.8)+0.1(0.32)=0.892

Answer

Answer

The total benefit is at most 48 with probability 0.892.

0.892(D)\boxed{0.892\quad\text{(D)}}