Exam MAS-I Practice Question 42

Study guide: Exam MAS-I

For a group of policies:

• 75% of policies have no loss in a year.
• A policy with a loss has exactly one, and its size follows a Pareto distribution with \alpha = 3 and \theta = 2{,}000, so that P(\text{size} > x) = \left(\frac{2{,}000}{x + 2{,}000}\right)^{3}.
• The expected annual loss per policy is 250.

Calculate the 90th percentile of the annual loss for a randomly selected policy.

• A) Less than 650
• B) At least 650, but less than 1,000
• C) At least 1,000, but less than 2,000
• D) At least 2,000, but less than 2,500
• E) At least 2,500

Answer this question and see the worked solution

Concepts tested

• Mixture Distribution
• Pareto Distribution
• Percentile
• Cumulative Distribution Function (CDF)

More questions from this set

• Exam MAS-I Practice Question 41
• Exam MAS-I Practice Question 43