IAI Actuarial Core Principles · Actuarial Statistics · Basic univariate distributions and generating samples
Monthly claim costs for a health portfolio of Suraksha Insurance are modelled as Normal with mean Rs 50,000 and standard deviation Rs 8,000. What is the 90th percentile of monthly claim cost, to the nearest rupee? (z for 90% = 1.2816)
The 90th percentile is about Rs 60,253. It equals the mean plus 1.2816 standard deviations, that is 50,000 plus 1.2816 times 8,000, because 1.2816 is the standard normal value leaving 10% in the upper tail.
- ARs 58,000
- BRs 60,253Correct
- CRs 62,816
- DRs 64,000
- Rs 60,000
Explanation
x = 50,000 + 1.2816 × 8,000 = 50,000 + 10,252.8 = 60,252.8, about Rs 60,253. Rs 58,000 adds one standard deviation only. Rs 62,816 forgets to multiply z by sigma.
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