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USTC
10-23-2006, 11:29 PM
e-(c-1)*E should be the right definition, but how could the solution to Q
Q22 Exam 1995, on page 183 Vol 2 of All 10, assume c=1 to get expense in basic=e=0.18?

:-?
Avi
10-24-2006, 02:10 AM
e-(c-1)*E should be the right definition, but how could the solution to Q
Q22 Exam 1995, on page 183 Vol 2 of All 10, assume c=1 to get expense in basic=e=0.18?

:-?

It doesn't matter, I believe. "Expense in the basic" is (e - (c-1)E).
actuary_zhang
10-24-2006, 10:51 AM
e-(c-1)*E should be the right definition, but how could the solution to Q
Q22 Exam 1995, on page 183 Vol 2 of All 10, assume c=1 to get expense in basic=e=0.18?

:-?

I am also confused with that. The assumption c=1 is not based on available information and personally I deem the problem deficient.
Avi
10-24-2006, 11:18 AM
e-(c-1)*E should be the right definition, but how could the solution to Q
Q22 Exam 1995, on page 183 Vol 2 of All 10, assume c=1 to get expense in basic=e=0.18?

:-?

I am also confused with that. The assumption c=1 is not based on available information and personally I deem the problem deficient.

The basic premium factor is supposed to cover expensed and the insurance charge. IIRC, the expenses covered include LAE for the expected loss. Remember, with guaranteed cost premium \large (1-D) = (e+E) \cdot T, so LAE is included in the "e" factor. However, as actual losses will be loaded for LAE, since this is a retro, the portion of expense needed for the expected losses must be stripped out, or (c-1)*E. I think the sentence about c=1 is irrelevant, unnecessary, and misleading, but then again, I failed this exam last time :(
3tac
10-24-2006, 11:27 AM
Hey Avi, haven't seen you around here, are you sitting for this again?
actuary_zhang
10-24-2006, 11:57 AM
Hi, Avi, I know that the expense factor in the basic premium is accurately expressed by e-(c-1)*E. But the value of c comes from nowhere. That is why I consider the question to be deficient. Wish you good luck this time.
frank_exams
10-24-2006, 12:36 PM
The question is fine. The solution in All10 is wrong.

The answer should be E because c is not given. Note that the All10 solution applied tax incorrectly as well. For the older problems, I suspect the All10 solution was derived by hand and not from CAS accepted solutions. I've found this to happen more than once.

Frank
Avi
10-24-2006, 04:45 PM
Hey Avi, haven't seen you around here, are you sitting for this again?

Yes :(
Avi
10-24-2006, 04:46 PM
Hi, Avi, I know that the expense factor in the basic premium is accurately expressed by e-(c-1)*E. But the value of c comes from nowhere. That is why I consider the question to be deficient. Wish you good luck this time.

And I believe that value was given in the question, namely, the value of e-(c-1)*E, so the value of c is irrelevant, I think.
frank_exams
10-24-2006, 06:48 PM
Hi, Avi, I know that the expense factor in the basic premium is accurately expressed by e-(c-1)*E. But the value of c comes from nowhere. That is why I consider the question to be deficient. Wish you good luck this time.

And I believe that value was given in the question, namely, the value of e-(c-1)*E, so the value of c is irrelevant, I think.

They give you e-(c-1)E, E, tax and SP, but you're asked to compute T(e+E)SP. Without c, you cannot solve.

Frank