Independent solution

How to solve this Conditional Expectation question

Setup

Setup

The hospitalization count takes values 0, 1, and 2 with probabilities 0.49, 0.42, and 0.09.

P(N=0,1,2)=(0.49,0.42,0.09)P(N=0,1,2)=(0.49,0.42,0.09)

Model

Model

The loss condition always holds for counts 0 and 1 and holds with probability one half for count 2.

P(L<1N=0)=P(L<1N=1)=1P(L<1\mid N=0)=P(L<1\mid N=1)=1
P(L<1N=2)=12P(L<1\mid N=2)=\frac12

Compute

Compute

The conditioning event has probability 0.955, while its count-weighted numerator is 0.51. Their ratio is 0.534031.

P(L<1)=0.49+0.42+0.09(0.5)=0.955P(L<1)=0.49+0.42+0.09(0.5)=0.955
E[N1{L<1}]=0.42+2(0.09)(0.5)=0.51E[N1_{\{L<1\}}]=0.42+2(0.09)(0.5)=0.51
E[NL<1]=0.510.955=0.534031E[N\mid L<1]=\frac{0.51}{0.955}=0.534031

Answer

Answer

The conditional expected count rounds to 0.534, corresponding to choice B.

0.534(B)\boxed{0.534\quad\text{(B)}}