You Recently Had Auto Accident Was Your Fault

You recently had an auto accident that was your fault. If you have another accident or receive another moving violation within the next 3 years, you will become part of the “assigned risk” pool, and you will pay an extra $600 per year for insurance. If the probability of an accident or moving violation is 20% per year, what is the probability distribution of your “extra” insurance payments over the next 4 years? Assume that insurance is purchased annually and that violations register at the end of the year-just in time to affect next year’s insurance premium.

Posted in Uncategorized