Actuarial Outpost STAM exercise 323
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 Short-Term Actuarial Math Old Exam C Forum

#1
05-15-2018, 12:16 AM
 gauchodelpaso Member SOA Join Date: Feb 2012 College: Eastern Michigan U Posts: 113
STAM exercise 323

It seems that I can't make sense of most of these exercises. The ratio seems more like 25 million to 22 million to me, no idea where the 5000/3000 comes from. Rest seems to make sense
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German
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Prelims: 1/P - 2/FM - 3F/MFE - LTAM - STAM
VEE: Economics - Corporate Finance - Applied Statistics
#2
05-15-2018, 09:57 AM
 daaaave David Revelle Join Date: Feb 2006 Posts: 3,037

The 5/3 is from an older version of the solutions. They’ve updated it to 25/14
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#3
05-15-2018, 10:49 AM
 gauchodelpaso Member SOA Join Date: Feb 2012 College: Eastern Michigan U Posts: 113

Thanks Dave!, need to update mine,lol
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German
______________
Prelims: 1/P - 2/FM - 3F/MFE - LTAM - STAM
VEE: Economics - Corporate Finance - Applied Statistics
#4
05-14-2019, 08:36 AM
 joelcheung SOA Join Date: Mar 2018 College: Singapore Management University, sophomore Posts: 5

Hi gauchodelpaso,

May I know what are the formulas used to solve this question? I am using the ACTEX Sprig 2018 Exam STAM study manual but I couldn't find the formulas needed to solve this question.

Thank you!
#5
05-14-2019, 12:12 PM
 daaaave David Revelle Join Date: Feb 2006 Posts: 3,037

You probably want to look under wherever they cover ILFs. The point is that in computing the pure premium for the 250,000 limit, we want to use only data coming from policies with a limit of at least 250,000, so the first bullet point in the question is not used. Comparing the 2nd and 3rd bullet point, we see that increasing the limit from 50k to 250k increases the losses from 14,000,000 to 25,000,000, so the pure premium increases by a factor of 25,000,000/14,000,000 = 25/14, making the new pure premium (old pure premium) * 25/14 = 240 * 25/14.

From the original numbers, the variable expenses are 10% of the gross premium (30/300), then we plug into the standard formula relating pure premium to gross premium, namely that gross premium = (pure premium + fixed expenses)/(1-variable expense ratio)
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 Tags stam 323