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ETC1010
TITLE OF PAPER:
DATA MODELLING
EXAM DURATION:
READING TIME:
10 minutes
X YES
NO
YES
X NO
STUDENT ID
__ __ __ __ __ __ __ __DESK NUMBER
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Page 1 of 9
(a)
(b)
(5 marks)
(5 marks)
Question 3 (6 marks)
3 (a) List the assumptions of the chain ladder method
(2 marks)
(2 marks)
(3 marks)
(2 marks)
The total amount of claims that have been paid to date is $1,701
(b) Use the chain ladder method to estimate the outstanding claim
reserve in respect of accident years 2007 and 2008.
(4 marks)
Page 2 of 9
Appendix
Mortality table for question 2
Age x
q_x
l_x
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
0.0074
0.0074
0.0075
0.0075
0.0076
0.0077
0.0079
0.0081
0.0084
0.0087
0.0091
0.0097
0.0104
0.0112
0.0122
0.0134
0.0149
0.0166
0.0186
0.0209
0.0236
0.0266
0.0300
0.0338
0.0381
0.0427
0.0478
0.0534
0.0593
0.0658
0.0726
0.0799
0.0875
0.0956
0.1041
0.1130
0.1222
0.1319
0.1419
0.1524
0.1650
0.1787
0.1928
0.2072
0.2219
0.2368
100,000
99,257
98,515
97,773
97,028
96,278
95,518
94,745
93,954
93,137
92,287
91,394
90,448
89,436
88,345
87,159
85,862
84,437
82,866
81,132
79,219
77,110
74,794
72,263
69,511
66,540
63,357
59,976
56,417
52,707
48,881
44,977
41,040
37,116
33,252
29,495
25,890
22,475
19,285
16,346
13,650
11,211
9,050
7,175
5,582
4,260
Page 3 of 9
Where for each hospital the regressand C is the average cost per case treated and the value of
each regressor gives the proportion of cases treated in each treatment category where the
categories are:
M= Medical
P= Pediatrics
GS= General Surgery
E= Enterology
TO= Traumatic & Orthopedic Surgery
OS= Other Surgery
G= Gynecology
Ob= Obstetrics
N.B.
Where other is the proportion of cases treated a miscellaneous collection of other treatment
categories.
Data on 177 hospitals yielded the following least squares regression results where
denotes the standard error of the regression coefficient .
The Coefficient of Determination was 0.3076.
The F statistic for the overall significance was 9.33 (The Excel function value
F.INV(0.99,8,168)=2.6817.).
Page 4 of 9
Regressor
s.e.(b)
AC
44.97 18.89
114.48
-44.54 28.51
24.97
GS
-36.81 14.88
32.7
-54.26 16.52
15.25
TO
-29.82 17.18
39.69
OS
28.51 20.27
98.02
-10.79 21.47
58.72
Ob
-34.63 16.34
34.88
Constant
69.51
69.51
1. Each of the regressor variables is obviously nominal. Are they also measured on a
ratio scale? Briefly explain your answer.
(2 Marks)
2. Which of the eight regressor variables has a coefficient that is not statistically
significantly different from zero? (The Excel function value
T.INV(0.975,168)=1.9742.) It is suggested that the variables that do not have
significant coefficients should be deleted from the relationship. Is this suggestion
well founded? If so, why? If not, why not?
(8 Marks)
3. How have the values in the column labelled AC been calculated? What is the
appropriate interpretation to be attached to these numbers?
(5 Marks)
Page 5 of 9
Where
Q= index of production at constant factor cost,
K= gross capital stock at replacement cost,
H= hours worked per employee,
and the figures in parentheses are the coefficient standard errors.
1. Do the estimated coefficients suggest that the industry was experiencing increasing or
decreasing returns to scale over these two decades? Justify your answer.
(3Marks)
2. Verify that each partial regression slope coefficient is statistically different from zero
by conducting an appropriate one sided hypothesis test at the 5% level of
significance. (The Excel function value T.INV(0.95,18)=1.7341.)
(3 Marks)
To allow for changes in technology over time the model was re-estimated to give
Page 6 of 9
-3
-29
-1
23
0
16
1
3
2
-4
3
7
Does
(b)
Does
(c)
Does
(d)
Does
Suppose
(e)
Must
point?
also continuous on D.
(f)
Page 7 of 9
Page 8 of 9
Note MAD
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END OF EXAMINATION
Page 9 of 9