Exam 8 Practice Question 2
Study guide: Exam 8
Determine which of the following statements about evaluating the validity of rate classes are true.
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I. Under ASOP No. 12, when the available data are not sufficient for credible inferences about each class, the actuary balances predictability against homogeneity.
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II. A finer set of classes that lowers the squared error on the data used to fit it has thereby been shown to be valid.
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III. In a lasso credibility model, a class with plenty of exposure whose modelled coefficient is penalized to zero has experience too close to its complement to deviate from it.
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A) I only
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B) I and II only
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C) I and III only
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D) II and III only
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E) The answer is not given by (A), (B), (C), or (D)
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