(Solved):   Solve answer.. Step by step using formulas. (5 marks) Let \( S \) be an aggregate model, ...

 

Solve answer.. Step by step using formulas.

(5 marks) Let \( S \) be an aggregate model, with a frequency distribution \( N \) and a severity distribution \( X \). Assur ? that \( N \) is a Binomial distribution with parameters \( m=6 \) and \( p=\theta \), and \( X \) is a geometric distribution wi ? parameter \( \alpha \). It is known that \( P(S=0)=0.5 \) and \( P(S=1)=0.05 \) Determine the value of the parameters \( \theta \) and \( \alpha \). Hint: Use the probability generating function trom the compound frequency distribution described in Ch. 7, Section 1.