Banner Ad 1

Collapse

Announcement

Collapse
No announcement yet.

Help on Sample Question #17 - independent theory

Collapse
This topic is closed.
X
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Help on Sample Question #17 - independent theory

    On the sample exam questions provided by SOA, on question #17, it is states as:

    An insurance company pays hospital claims. The number of claims that include emergency room or operating room charges is 85% of the total number of claims. The number of claims that do not include emergency room charges is 25% of the total
    number of claims. The occurrence of emergency room charges is independent of the occurrence of operating room charges on hospital claims.

    Calculate the probability that a claim submitted to the insurance company includes
    operating room charges.

    (A) 0.10
    (B) 0.20
    (C) 0.25
    (D) 0.40
    (E) 0.80

    The answer provided is 0.85=Pr(O U E) = Pr(O) + Pr(E) - Pr(O)Pr(E).

    My questions is since O and E are independent, Pr(0)Pr(E) should be zero. Why is Pr(O)Pr(E) calculated as the answer?

    Final answer is 0.4 instead of 0.1.

  • #2
    Independent

    Independent is entirely different than mutually exclusive. When they are mutually exclusive, probability of intersection is zero.

    In fact, you should remember that the concepts of:

    Independence

    and

    Mutually Exclusive

    are in fact

    Mutually Exclusive. The only way mutually exclusive events can be independent only if one of them has probability zero.

    Yours,
    Krzys' Ostaszewski

    Originally posted by kerrichen
    On the sample exam questions provided by SOA, on question #17, it is states as:

    An insurance company pays hospital claims. The number of claims that include emergency room or operating room charges is 85% of the total number of claims. The number of claims that do not include emergency room charges is 25% of the total
    number of claims. The occurrence of emergency room charges is independent of the occurrence of operating room charges on hospital claims.

    Calculate the probability that a claim submitted to the insurance company includes
    operating room charges.

    (A) 0.10
    (B) 0.20
    (C) 0.25
    (D) 0.40
    (E) 0.80

    The answer provided is 0.85=Pr(O U E) = Pr(O) + Pr(E) - Pr(O)Pr(E).

    My questions is since O and E are independent, Pr(0)Pr(E) should be zero. Why is Pr(O)Pr(E) calculated as the answer?

    Final answer is 0.4 instead of 0.1.
    Want to know how to pass actuarial exams? Go to: smartURL.it/pass

    Comment

    Working...
    X