Spring 2015 Q 18

judyohjudyoh
in F-08-ExpectedClms

Why does the answer for sample 3 not apply a 1.04 pure premium trend to the trended ultimate?

Comments

  • GrahamGraham

    It looks like sample answer 3 has mistakes in the intermediate steps but the final answer is correct. In particular, the highlighted values have the wrong exponents on the trend of 1.04:

    image.png

    The highlighted values should be:

    • 1.04^3 for AY 2012
    • 1.04^2 for AY 2013
    • 1.04^1 for AY 2014

    Then the final calculation shown below should not have the factor of 1.04, but since they got the exponents wrong in the table above, they had to (incorrectly) insert the factor of 1.04 to correct for the errors in the table.

    image.png

    I would just ignore sample answer 3.

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