Exam 5 Practice Question 3
Study guide: Exam 5
An actuary is measuring severity trend for a ratemaking analysis. Accident-year average severities are:
| Accident year | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| Average severity | 4,800 | 4,950 | 5,130 | 5,240 | 5,430 |
The actuary selects the trend from a linear least-squares fit to these five points and applies it to the accident year 2024 average severity over a trend period of 2.75 years.
Calculate the projected average severity.
- A) 5,536
- B) 5,585
- C) 5,856
- D) 5,903
- E) 6,050
Answer this question and see the worked solution