Actuarial Notes

CAS Exam MAS-II Fall 2019, Question 9

Study guide: Exam MAS-II

You are testing the relative efficiency of two types of gasoline in miles per gallon.

  • You use six similar vehicles for your test.
  • You perform the test on four different days.
  • Each automobile only receives one of the two different types of gasoline.
  • There is a random intercept associated with each automobile i.
  • There is a random effect associated with each testing day t.

Determine the best structure for the Linear Mixed Model that describes the relationship between the covariates and miles per gallon.

  • A) MPG_{ti} = \beta_0 + \beta_1 \times FUEL1_i + \varepsilon_{ti}
  • B) MPG_{ti} = \beta_0 + \beta_1 \times FUEL1_i + u_{0i} + u_{1i} + \varepsilon_{ti}
  • C) MPG_{ti} = \beta_0 + \beta_1 \times FUEL1_i + u_{0i} + u_{t0} + \varepsilon_{ti}
  • D) MPG_{ti} = \beta_0 + \beta_1 \times FUEL1_i + \beta_2 \times TESTDAY_t + u_{0i} + \varepsilon_{ti}
  • E) MPG_{ti} = \beta_0 + \beta_1 \times FUEL1_i + \beta_2 \times TESTDAY_t + u_{t0} + \varepsilon_{ti}

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