CAS Exam 8 Fall 2012, Question 12
Study guide: Exam 8
Undeveloped losses follow a uniform distribution between $0 and $500. Each loss has an equal likelihood of developing such that it is multiplied by either 0.75 or 1.25.
Part a (1 point)
Calculate the excess ratio at $400 for undeveloped losses.
Part b (1.5 points)
Calculate the excess ratio at $300 for developed losses.
Part c (1 point)
Suppose instead that loss multipliers are uniformly distributed between 0.75 and 1.25.
Determine whether the excess ratio at $300 for developed losses will be higher than, equal to, or lower than the excess ratio calculated in part b above. Do not attempt to calculate the new excess ratio.
Answer this question and see the worked solution