Exam 7 Practice Question 3
Study guide: Exam 7
A cumulative paid loss triangle has five accident years (I = 5). The amounts at development ages 1 and 2 for the four accident years that have reached age 2 are:
| Accident year | Age 1 | Age 2 |
|---|---|---|
| 1 | 1,000 | 1,800 |
| 2 | 1,200 | 2,100 |
| 3 | 900 | 1,710 |
| 4 | 1,500 | 2,550 |
Using Mack's (1994) unbiased estimator, calculate the variance parameter \alpha_1^2 for the development from age 1 to age 2.
- A) Less than 7.0
- B) At least 7.0, but less than 8.1
- C) At least 8.1, but less than 9.0
- D) At least 9.0, but less than 13.0
- E) At least 13.0
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