Luxury Limousine Service (LLS) uses a fleet of 100 vehicles to provide limousine
ID: 2925120 • Letter: L
Question
Luxury Limousine Service (LLS) uses a fleet of 100 vehicles to provide limousine and party bus services. From past information, the Chief Risk Officer for LLS has constructed the following loss distribution for the number of accidents per vehicle per year.
# of accidents per vehicle per year
# of vehicles having these losses
0
70
1
20
2
10
Find the expected number of accidents per vehicle per year, i.e., calculate the E(F).
2.
2. Now assume from past information, LLS has constructed the following distribution for the dollar amount of losses when accidents do occur.
$ amount of losses
Probability of dollar loss
2,000
0.80
10,000
0.18
50,000
0.02
Find the expected cost per accident, i.e., calculate the E(S).
Calculate the expected loss per vehicle per year.
c. Calculate the expected loss for all vehicles per year.
# of accidents per vehicle per year
# of vehicles having these losses
0
70
1
20
2
10
Explanation / Answer
Ans:
1)E(F)=0*(70/100)+1*(20/100)+2(10/100)
=0*0.7+1*0.2+2*0.1
=0+0.2+0.2
=0.4
2)Expected loss=2000*0.8+10000*0.18+50000*0.02=1600+1800+1000=4400
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