Overview
I'm working on a mathematics question and need the explanation and answer to help me learn.
1) Claim severity in each period has the following distribution: fX (0) = 0.5, fX (1) = 0.3, fX (2) = 0, and fX (3) = 0.2. Find the probability of ultimate ruin if the initial surplus is 4.
2) Claim severity per period is distributed as BN (4, 0.2). Calculate the probability of ruin at or before time 3 if the initial surplus is 3.