Exam MAS-I Practice Question 109
Study guide: Exam MAS-I
An actuary models expected log claim severity for three territories with vehicle value x as a covariate, using the analysis of covariance model
\mu_{ij} = \mu + \alpha_i + \beta x_{ij}, \qquad \alpha_1 = 0On the scale of this model, the expected difference between any two territories is the same at every vehicle value. Which change to the model would allow that difference to depend on vehicle value?
- A) Add a territory-by-vehicle-value interaction term
- B) Add a squared vehicle-value term to the model
- C) Remove the intercept and include all three territory indicators
- D) Replace the territory indicators by a single numeric territory code
- E) Add vehicle age as a second covariate with its own slope
Answer this question and see the worked solution