Fall 2017 ACTSC 613 Zhu, M

University of Waterloo
ACTSC 613

Problem of the Week, #5

( Distributed: October 12, 2017; Due: October 19, 2017 )

1. A novice insurance agent has just sold n policies. Let Xi be the amount of time passed before
policy holder i makes a claim. Assume that the Xi ’s are independent exponential random
variables with different rate parameters λi , i = 1, 2, ..., n. That is,

fXi (x) = λi e−λi x , x > 0.

Let T be the amount of time that this agent can stay “claim free,” i.e., T is the amount of
time before any of his client makes a claim.

(a) Express T as a function of X1 , X2 , ..., Xn .

(b) On average, how long can we expect this agent to stay “claim free”? That is, find E(T ).

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