A company has five employees on its health insurance plan. Each year, each employee independently has an 80% probability of no hospital admissions. If an employee requires one or more hospital admissions, the number of admissions is modeled by a geometric distribution with a mean of 1.50. The numbers of hospital admissions of different employees are mutually independent. Each hospital admission costs 20,000. Calculate the probability that the company's total hospital costs in a year are less than 50,000.

the probability that the company's total hospital costs in a year are less than 50,000  = 0.7828

Step-by-step explanation:

From the given information:

the probability that the company's total hospital costs in a year are less than 50,000 will be the sum of the probability of the employees admitted.

If anyone is admitted to the hospital, they have probability of making at least one more visit, and a  probability  that this is their last visit.

If zero employee was admitted ;

Then:

Probability = (0.80)⁵

Probability = 0.3277

If one employee is admitted once;

Probability =

Probability =

Probability = 0.2731

If one employee is admitted twice

Probability =

Probability =

Probability = 0.1820

If two employees are admitted once

Probability =

Probability =

Probability = 0.0910

∴

the probability that the company's total hospital costs in a year are less than 50,000  = 0.3277 + 0.2731 + 0.1820

the probability that the company's total hospital costs in a year are less than 50,000  = 0.7828

54

step-by-step explanation:

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