CAS Exam MAS-I Spring 2019, Question 6

Study guide: Exam MAS-I

You are given the following information:

• The severity of each theft loss in a Homeowners insurance policy independently follows an exponential distribution with mean 2,000.
• The insurance company only pays the amount exceeding the per-loss deductible.
• \sigma_j is the standard deviation of the amount the insurance company pays per theft with a deductible of j.

Calculate the absolute difference between \sigma_{1000} and \sigma_{500}.

• A) Less than 90
• B) At least 90, but less than 100
• C) At least 100, but less than 110
• D) At least 110, but less than 120
• E) At least 120

Answer this question and see the worked solution

Concepts tested

• Deductible
• Exponential Distribution
• Payment Random Variable
• Standard Deviation

More questions from this set

• CAS Exam MAS-I Spring 2019, Question 5
• CAS Exam MAS-I Spring 2019, Question 7