CAS Exam MAS-I Fall 2019, Question 21
Study guide: Exam MAS-I
An insurer is estimating the impact of a loss mitigation program. They ran an experiment to evaluate the severities of five losses before and after the program was instituted:
| A | B | C | D | E | |
|---|---|---|---|---|---|
| Original Severity | 400 | 800 | 1200 | 2000 | 5000 |
| New Severity | 280 | 500 | 1235 | 1600 | 4800 |
A paired t-test with the following hypotheses was used to evaluate the effectiveness of this program:
H_0: The program had no impact on lossesH_1: The program was able to reduce losses
Calculate the smallest significance level at which one would reject the null hypothesis.
- A) Less than 1.0%
- B) At least 1.0%, but less than 2.5%
- C) At least 2.5%, but less than 5.0%
- D) At least 5.0%, but less than 10.0%
- E) At least 10.0%
Answer this question and see the worked solution