SOA Exam FAM Sample Question 55
Study guide: Exam FAM
A company has determined that the limited fluctuation full credibility standard is 2000 claims if:
(i) The total number of claims is to be within 3% of the true value with probability p.
(ii) The number of claims follows a Poisson distribution.
The standard is changed so that the total cost of claims is to be within 5% of the true value with probability p, where claim severity has probability density function:
f(x) = \frac{1}{10{,}000}, \quad 0 \le x \le 10{,}000
Calculate the expected number of claims necessary to obtain full credibility under the new standard using limited fluctuation credibility.
- A) 720
- B) 960
- C) 2160
- D) 2667
- E) 2880
Answer this question and see the worked solution