Part 5: McClenahan pg 129

[Expunge]

on page 129 there is a question asking for the target loss ratio. the answer listed is .5833 is anyone able to get that answer? If so how?

[RamPrasad]

Yes, I got it. Consider general expenses as $45,000, not $5,000.

[Expunge]

T= (1-V-Q)/(1+G)

T = .5833 (?)
V = .32
Q = .05
G = .09

what's wrong?

[RamPrasad]

Here, T=(1-V-Q)/(1+G)

G=40,000/500,000 = 0.08
Q = 0.05

V = (2000,000+20,000+50,000)/1,000 + (45,000/900,000) = 0.32

T=(1 - 0.32 -0.05)/(1+.08) = 0.05833

[RamPrasad]

Correction:

V = (200,000 + 20,000 + 50,000)/1,000,000 + (45,000/900,000) = 032

Note that General expenses should be 45,000. Please refer to old edition of the book.

[Expunge]

Ok.

So why is ULAE included in V? where the calculation on page 114 does not include ULAE in V?

[Expunge]

Or are you refer to a typo in this pdf? http://casact.org/admissions/syllabus/ch3.pdf
(pg 55 of 74 is textbook pg 129)

where the 5,000 should read 45,000.

(i think i was trying to add 40,000 ULAE to 5,000 Gen)