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variance troubles (exponential rv problem)

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  • variance troubles (exponential rv problem)

    Hi everyone,

    I don't understand how the variance is worked out in this problem.

    Denoting H as the event an individual is hospitalized.
    P(H=1) = 0.15, and claims are an exponential rv with lambda = 0.1.

    The expected value of a hospital claim is:

    E(Y) = 0.85*0 + 0.15*(1/0.1) = 1.5

    with

    Var(Y) = 27.75

    Now the solution is given, however I still can't work out how it's calculated. I remember the variance of an exponential rv is 1/(lambda^2)...

    Many thanks

  • #2
    i have it now, cheers

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