Study for the SOA Fundamentals of Actuarial Mathematics (FAM) Exam. Prepare with flashcards and multiple choice questions with detailed explanations. Get ready for your future as an actuary!

Multiple Choice

The sum of n independent Geometric random variables is a geometric distribution with alpha equal to which value?

When you add independent geometric random variables, the result is a negative binomial distribution. In that family, the parameter alpha counts how many geometric terms were combined (the number of successes you’re aiming for). Since you summed n geometric variables, the negative binomial distribution has alpha equal to n. The pmf can be written as P(S = k) = C(k + n − 1, k) (1 − p)^k p^n for k = 0, 1, 2, ..., where p is the common success probability of each geometric variable. So alpha = n.

When you add independent geometric random variables, the result is a negative binomial distribution. In that family, the parameter alpha counts how many geometric terms were combined (the number of successes you’re aiming for). Since you summed n geometric variables, the negative binomial distribution has alpha equal to n. The pmf can be written as P(S = k) = C(k + n − 1, k) (1 − p)^k p^n for k = 0, 1, 2, ..., where p is the common success probability of each geometric variable. So alpha = n.