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IAI Actuarial Core Principles · Actuarial Statistics · Basic univariate distributions and generating samples

A simulation estimates the mean claim cost using n independent runs. The sample standard deviation of the outputs is Rs 400. What is the standard error of the estimated mean when n = 400?

The standard error is Rs 20. It equals the sample standard deviation divided by the square root of the number of simulations, so 400 divided by 20 gives 20. Dividing by n rather than its square root would wrongly give Rs 1.

  1. ARs 1
  2. BRs 2
  3. CRs 10
  4. DRs 20Correct
  5. Rs 40

Explanation

Standard error = s/sqrt(n) = 400/sqrt(400) = 400/20 = Rs 20. Rs 1 would come from dividing by n instead of sqrt(n). Rs 2 and Rs 10 come from other wrong divisions.

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