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Feb17-12, 10:52 AM
So I've been trying to do probability problems to take the P/1 Exam, and I've come across a problem that I don't quite understand.
An insurance company estimates that 40% of policyholders who have only an auto policy
will renew next year and 60% of policyholders who have only a homeowners policy will
renew next year. The company estimates that 80% of policyholders who have both an
auto and a homeowners policy will renew at least one of those policies next year.
Company records show that 65% of policyholders have an auto policy, 50% of
policyholders have a homeowners policy, and 15% of policyholders have both an auto
and a homeowners policy. Using the company’s estimates, calculate the percentage of
policyholders that will renew at least one policy next year.
Attempt at solution:
Pr(A ∩ H(compliment)) = Pr(A - H) = Pr(A) - Pr(H)
Pr(A) = .65
Pr(H) = .50
.65 - .50 = .15
However, the solution claims that Pr(A - H) = Pr(A-(A ∩ H)) = .50. How is that possible? How did they derive that?
Edit: Disregard, I understand it now. I had to apply the Pr(A U B) = Pr(A) + Pr(B) - Pr(A ∩ B) rule.
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