Exam MAS-I Practice Question 159
Study guide: Exam MAS-I
Claims are classified as standard or litigated from their log-severity x. In the training data:
| Class | Share of claims | Log-severity |
|---|---|---|
| Standard | 0.80 | N(7.0,\ 0.6^2) |
| Litigated | 0.20 | N(8.0,\ 1.2^2) |
Using quadratic discriminant analysis with these as the estimates, calculate the probability that a claim with log-severity x = 8.2 is litigated.
- A) Less than 0.40
- B) At least 0.40, but less than 0.55
- C) At least 0.55, but less than 0.70
- D) At least 0.70, but less than 0.80
- E) At least 0.80
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