Exam MAS-I Practice Question 69

Study guide: Exam MAS-I

Ground-up losses follow a Pareto distribution with \alpha = 3 and \theta = 2{,}000:

F(x) = 1 - \left(\frac{\theta}{x + \theta}\right)^{\alpha}, \quad x > 0

A policy has an ordinary deductible of 1,000 and no limit. Which distribution describes the amount paid, X - 1{,}000, on a loss that produces a payment?

• A) Pareto with \alpha = 3 and \theta = 1{,}000
• B) Pareto with \alpha = 3 and \theta = 2{,}000
• C) Pareto with \alpha = 2 and \theta = 3{,}000
• D) Exponential with mean 1,500
• E) Pareto with \alpha = 3 and \theta = 3{,}000

Answer this question and see the worked solution

Concepts tested

• Pareto Distribution
• Deductible
• Payment Random Variable

More questions from this set

• Exam MAS-I Practice Question 68
• Exam MAS-I Practice Question 70