Financial Risk Manager Part 1
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For a certain insured, the probability of making no claim during a policy period is .60. The probability of making 1 claim is .25. What is the probability that this insured makes no more than 1 claim during the policy period?
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NNikitesh
A
0.15
B
0.25
C
0.35
D
0.85
Explanation:
The question asks for the probability of making 'no more than 1 claim', which means either 0 claims or 1 claim. Since these events are mutually exclusive (you cannot have both 0 claims and 1 claim at the same time), we can simply add their probabilities:
- Probability of 0 claims = 0.60
- Probability of 1 claim = 0.25
Total probability = 0.60 + 0.25 = 0.85
Therefore, the correct answer is 0.85, which corresponds to option D.
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