SOA Exam FAM Sample Question 48
Study guide: Exam FAM
You are given the following 20 bodily injury losses before the deductible is applied:
| Loss | Number of Losses | Deductible | Policy Limit |
|---|---|---|---|
| 750 | 3 | 200 | \infty |
| 200 | 3 | 0 | 10,000 |
| 300 | 4 | 0 | 20,000 |
| >10,000 | 6 | 0 | 10,000 |
| 400 | 4 | 300 | \infty |
Past experience indicates that these losses follow a Pareto distribution with parameters \alpha and \theta = 10{,}000.
Calculate the maximum likelihood estimate of \alpha.
- A) Less than 2.0
- B) At least 2.0, but less than 3.0
- C) At least 3.0, but less than 4.0
- D) At least 4.0, but less than 5.0
- E) At least 5.0
Answer this question and see the worked solution