Exam MAS-I Practice Question 107
Study guide: Exam MAS-I
A reinsurer believes that each cedant's incurred losses are proportional to its earned premium, and fits the model y_i = \beta x_i + \varepsilon_i with no intercept. Earned premium x and incurred losses y (both in millions) for four cedants are:
| Cedant | 1 | 2 | 3 | 4 |
|---|---|---|---|---|
Premium x |
2 | 4 | 6 | 8 |
Losses y |
1.0 | 3.2 | 3.8 | 5.6 |
Calculate the least-squares estimate of \beta. Give your answer to four decimal places.
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