Actuarial Notes

CAS Exam MAS-II Fall 2019, Question 34

Study guide: Exam MAS-II

Assume our data x_1, x_2, \ldots, x_n come from a normal distribution with an unknown mean \mu and known standard deviation, \sigma. We assume a flat prior for \mu.

We use the Metropolis algorithm to sample from the posterior distribution of \mu using a standard normal distribution as a proposal distribution. The chain is allowed to run for 3,000 iterations.

Calculate the probability that the 1000^{th} draw is greater than the 999^{th} draw.

  • A) Less than 0.30
  • B) Greater than or equal to 0.3 but less than 0.45
  • C) Greater than or equal to 0.45 but less than 0.60
  • D) Greater than or equal to 0.60 but less than 0.75
  • E) Greater than or equal to 0.75

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