Concept explainers
Insurance An insurance company classifies its drivers into three groups: G0 (no accidents). G1 (one accident), and G2 (more than one accident). The probability that a G0 driver will remain a G0 after 1 year is 0.75, that the driver will become a G1 is 0.20, and that the driver will become a G2 is 0.05. A G1 driver cannot become a G0 (this company has a long memory). There is a 0.70 probability that a G1 driver will remain a G1. A G2 driver must remain a G2.
(a) Write a transition matrix using this information.
(b) Suppose that the company accepts 50.000 new policy holders. all of whom are G0 drivers. Find the number in each group after the following time periods.
(i) 1 year (ii) 2 years (iii) 3 years (iv) 4 years
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Finite Mathematics (11th Edition)
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