CAS Exam MAS-I Fall 2018, Question 26
Study guide: Exam MAS-I
You are given the following information from a model constructed to predict the probability that a Homeowners policy will be retained into the next policy term:
| Response variable | retention |
| Response distribution | binomial |
| Link | probit |
Pseudo R^2 |
0.6521 |
| Parameter | df | \hat\beta |
|---|---|---|
| Intercept | 1 | 0.4270 |
| Tenure: < 5 years | 0 | 0.0000 |
Tenure: \ge 5 years |
1 | 0.1320 |
| Prior Rate Change: < 0% | 1 | 0.0160 |
| Prior Rate Change: [0%, 10%] | 0 | 0.0000 |
| Prior Rate Change: > 10% | 1 | -0.0920 |
| Amount of Insurance (000's) | 1 | 0.0015 |
Let \hat\pi be the modeled probability that a policy with 4 years of tenure who experienced a +12% prior rate change and has 225,000 in amount of insurance will be retained into the next policy term.
Calculate \hat\pi.
- A) Less than 0.60
- B) At least 0.60, but less than 0.70
- C) At least 0.70, but less than 0.80
- D) At least 0.80, but less than 0.90
- E) At least 0.90
Answer this question and see the worked solution