Independent solution

How to solve this Uniform Distribution question

Setup

Setup

Let L be the loss and Y the amount paid after the deductible. Express the payment as a positive-part transformation.

Y=(L400)+Y=(L-400)_+

Model

Model

Translate both payment inequalities to loss thresholds before forming the conditional event.

Y<400L<800Y<400\quad\Longleftrightarrow\quad L<800
Y>300L>700Y>300\quad\Longleftrightarrow\quad L>700

Compute

Compute

Under a uniform distribution, the ratio of probabilities is the ratio of interval lengths.

Pr(Y>300Y<400)=Pr(700<L<800)Pr(L<800)\Pr(Y>300\mid Y<400)=\frac{\Pr(700<L<800)}{\Pr(L<800)}
Pr(Y>300Y<400)=8007008000=18=0.125\Pr(Y>300\mid Y<400)=\frac{800-700}{800-0}=\frac18=0.125

Answer

Answer

The requested conditional probability is 0.125.

0.125(B)\boxed{0.125\quad\text{(B)}}