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You are on page 1of 12

EXAMINERS REPORT

September 2015

Mathematical Statistics

Core Technical

Introduction

The Examiners Report is written by the Principal Examiner with the aim of helping candidates, both

those who are sitting the examination for the first time and using past papers as a revision aid and

also those who have previously failed the subject.

The Examiners are charged by Council with examining the published syllabus. The Examiners have

access to the Core Reading, which is designed to interpret the syllabus, and will generally base

questions around it but are not required to examine the content of Core Reading specifically or

exclusively.

For numerical questions the Examiners preferred approach to the solution is reproduced in this

report; other valid approaches are given appropriate credit. For essay-style questions, particularly the

open-ended questions in the later subjects, the report may contain more points than the Examiners

will expect from a solution that scores full marks.

The report is written based on the legislative and regulatory context pertaining to the date that the

examination was set. Candidates should take into account the possibility that circumstances may

have changed if using these reports for revision.

F Layton

Chairman of the Board of Examiners

December 2015

Subject CT3 (Probability and Mathematical Statistics Core Technical) September 2015 Examiners Report

A.

1. The aim of the Probability and Mathematical Statistics subject is to provide a grounding in

the aspects of statistics and in particular statistical modelling that are of relevance to

actuarial work.

2. Some of the questions in this paper admit alternative solutions from these presented in

this report, or different ways in which the provided answer can be determined. All

mathematically correct and valid alternative solutions or answers received credit as

appropriate.

3. Rounding errors were not penalised, unless excessive rounding led to significantly

different answers.

4. In cases where the same error was carried forward to later parts of the answer,

candidates were only penalised once.

5. In questions where comments were required, reasonable comments that were different

from those provided in the solutions also received full credit where appropriate.

B.

examination

1. The performance was generally good, with most questions being well answered.

2. The pass rate was in line with previous sessions and there were a number of excellent

scripts achieving very high scores.

3. In general, questions that required moderate mathematical calculus skills

(e.g. differentiation) were poorly answered.

4. In some parts candidates failed to distinguish between the need for different types of test

(e.g. normal z-test, as opposed to a t-test).

C.

Comparative pass rates for the past 3 years for this diet of examination

Year

September 2015

April 2015

September 2014

April 2014

September 2013

April 2013

Page 2

%

68

66

57

60

64

59

Subject CT3 (Probability and Mathematical Statistics Core Technical) September 2015 Examiners Report

Reasons for any significant change in pass rates in current diet to those in the

past:

The pass rate for this examination diet is slightly higher than the April 2015 rate, but not

materially different. Variation in the pass rate between sessions is expected as different

cohorts of students sit the examination however the increasing rates in recent diets reflect

stronger performance from the candidates.

Solutions

Q1

(i)

New sum of squares: (8438200 7702 5102 + 10002 + 2802) = 8663600

Therefore:

New sample mean = 11860/20 = 593

New standard deviation (sd) = {(8663600 118602/20)/19}0.5 = 292.95

(ii)

Since the sum of the two new claims is the same as those replaced, the mean is

the same.

However the sd has increased as the two new claims are further away from the

mean as compared to the two claims in the first sample.

Part (i) was generally well answered. In part (ii) the explanation about the sd

was not always convincing.

Q2

(i)

For the mode we need to maximise the probability density function (pdf):

f y

1 y

y e

and

d

1

1

log f y

0 y

.

dy

y

Page 3

Subject CT3 (Probability and Mathematical Statistics Core Technical) September 2015 Examiners Report

d2

1

Also

log

f

y

0.

dy 2

y2

So mode is at y

Therefore,

(ii)

1

3.

83

0.791 .

6.325

For unimodal symmetrical distributions, the mode will coincide with the mean

and therefore deviations of this measure from 0 will indicate asymmetry.

Also, the measure is standardised by dividing with the standard deviation to

make it scale-free.

Many candidates failed to work out the mode correctly. Note that this is a

typical calculus maximisation exercise. Part (ii) was not well answered, with

many candidates failing to comment on the relationship between the mean

and the mode, and very few mentioning the standardisation.

Q3

S12 12

/

~ F24,12 so the confidence interval is given by

S22 22

s12

2.4

s12

1

1

2.4

*

,

*

F

*

,

* 2.541 0.530, 4.066

2

12,24

2

s2 F24,12 s2

1.5 3.019 1.5

Generally very well answered.

Q4

(i)

We have

N 0,1 approximately, and the confidence interval is

n

given by

83

0.166

1.96 / 500 with

500

i.e. 0.166 1.96 0.166 / 500 which gives (0.130, 0.202).

Page 4

Subject CT3 (Probability and Mathematical Statistics Core Technical) September 2015 Examiners Report

(ii)

[Equivalently n is large.]

Generally well answered. Some candidates failed to properly justify the use

of the normal approximation.

Q5

(i)

(ii)

2606.96

0.1470326

5116701 61.44

r 25 2

1 r2

0.147 23

0.71

1 0.0216

Since this is a two-sided test and 0.71 is within the interval [1.714, 1.714] the

null hypothesis cannot be rejected at 10% level of significance.

(Note that other significance level may also be used.)

[Alternatively, Fishers transformation gives z = 0.695, and conclusion is the

same as above.]

Well answered. Note that the test in part (ii) is two-sided.

Q6

SS R 49 7 2 6 2 9 2 8,134

26 22 27

25

3

SS B 50 26 25 22 25 27 25

F2,147

700

SS B

700 147

2

6.325

SS R

2 8134

147

This is clearly a rather large value since the 1% point from a F2,120 distribution is

4.787, so the null hypothesis is rejected. We conclude that alcohol consumption is

different in different areas.

Page 5

Subject CT3 (Probability and Mathematical Statistics Core Technical) September 2015 Examiners Report

y A 1,300

y 2A

yB 1,100

36, 201

SST = 8,834

yB2

yC 1,350

25,964

yC2

y 3, 750

40, 419

y 2 102,584

SSB = 700 ]

Mixed answers. Candidates who were able to calculate correctly the various

sums of squares did well. Note that the main answer provided here is

computationally more efficient than the alternative answer (which most

candidates preferred).

Q7

1

1 0 0 1 0

4

E Y |X 1

0

1

4

(i)

E X |Y 1

(ii)

E X |Y 1

(iii)

1 0 0

1

4

1 0 0

1

4

1

1

1

1 0

4 1

4 0 , E X |Y 0 4

1

2

2

1

4 0

E X E E X | Y E X | Y 1 P Y 1

E X | Y 0 P Y 0

E X | Y 1 P Y 1

1 1 1

1 1

and E X 0 0

4 2 2

4 4

Some reasonable answers, but generally a mixed performance. Note that the

question asks candidates to determine the various expectations, so working

needs to be shown to gain full marks.

Page 6

Subject CT3 (Probability and Mathematical Statistics Core Technical) September 2015 Examiners Report

Q8

(i)

(ii)

P X A 1 P A P X B 1 P B P X C 1 P C

e0.2 *0.2*0.2 e0.1 *0.1*0.2 e0.05 *0.05*0.6 0.07938286 .

(iii)

P A | X 0 1

(iv)

P X A 1 P A

P X 0 1

= e0.2 *0.2*

0.2

0.4125

0.0794

Let X 0 be the number of claims submitted last year, and X 1 be the number of

claims that will be submitted in the current year.

P[{X 1 1C | X 0 1}]

The first probability is given as

P[{ X 1 1} A|X 0 1] P[ X 1 1| A X 0 1 P A | X 0 1]

P[ X 1 1| A P A | X 0 1]

X 0 given group membership. Then

P[ X 1 1| A P A | X 0 1] P X A 1

P X A 1 P A

P X 0 1

Similarly

P[{ X 1 1} B|X 0 1] P X B 1

P[{ X 1 1} C |X 0 1] P X C 1

P B

P X 0 1

P C

P X 0 1

0.02062

0.01709

Page 7

Subject CT3 (Probability and Mathematical Statistics Core Technical) September 2015 Examiners Report

Thus:

Q9

(i)

Part (i)

answer.

Part (ii)

Part (iii)

Part (iv)

other parts leading up to this. Many candidates did not attempt it.

(a)

So for the interval width for one observation to be equal to 10 we need:

(b)

height is Normally distributed with variance 2 / n. As before we want

2

(ii)

5

2.551

1.96

1.96

2

1 n 3.92 100

n

Let X1 and X 2 denote the survey estimates for the two peaks.

Then under H 0 : heights are the same,

D X 1 X 2 ~ N 0, 2 2 / 20 N 0, 2 /10

Page 8

Subject CT3 (Probability and Mathematical Statistics Core Technical) September 2015 Examiners Report

[Alternatively, the value of the statistic z = 1.983 can be compared with the

normal quantile 1.96.]

(iii)

sP2

1

19*2.52 19*2.62 6.505

20 20 2

test statistic =

1.6

1.6

1.984

2

1

2.55

sP

20

10

So do not reject H 0 : no difference in means at 5% significance level.

(iv)

Both systems gave the same estimate of difference and almost the same

standard deviation, with the second being lower. However the tests gave

different results.

We did not reject that there was no difference for the test in part (iii) as there

was greater uncertainty since we did not know the standard deviation

beforehand.

Part (i) was generally well answered. As the result is given in the question,

candidates needed to clearly show how to obtain it.

The performance in parts (ii) and (iii) was mixed. Many candidates failed to

demonstrate understanding of which statistic must be used in each of the two

tests, which was one of the main points of the question.

Q10

(i)

We have

X

e X i e n i i

and

L

Xi !

Xi !

i 1

n

i

i

and

d

l 0 n X i / 0 X i / n X

d

i

i

Page 9

Subject CT3 (Probability and Mathematical Statistics Core Technical) September 2015 Examiners Report

(ii)

~ N , CRlb approximately

with CRlb

1

d2

E 2 l

d

E X i / 2

i

E( X i ) n

i

n

X

, i.e. X 1.96

and replacing for the variance: 1.96

n

n

[Could also use central limit theorem with normal approximation to Poisson]

(iii)

(a)

1 e

Therefore, likelihood is given as

L e K 1 e

n K

l log L K n K log 1 e

and

d

e

log K

l 0 K n K

0

d

1 e

n

(b)

(iv)

The estimator in part (i) is based on more information, as the exact values of

the data are known, whereas in part (iii) only partial information is available.

Therefore the estimator in part (i) should be more reliable and is preferable.

Parts (i) and (ii) mostly well answered. In part (iii) many candidates did not

use the correct likelihood form. Answers to questions involving the likelihood

function of a model that may not be typical, have also been problematic in

recent sessions and candidates are encouraged to practise more with this

fundamental concept in statistics.

Page 10

Subject CT3 (Probability and Mathematical Statistics Core Technical) September 2015 Examiners Report

Q11

(i)

Test statistic:

2

Snew

2

Sold

2

Snew

2

Sold

~ F24,60

1

1

xi2 25 xi

24

25

800 25*42

16.67

24

2, 200 3002 / 61

= 12.08

60

F

16.67

1.38 1.7

12.08

Therefore, there is no evidence (at 5% level) to suggest that the variance for

new buildings is larger.

(ii)

s 2p

24 16.67 60 12.08

13.39

84

100 300

25 61

t

1.06

1

1

13.39

25 61

The 0.975 quantile (2-sided test) of the t84 distribution is between 1.98 and

2.00.

There is no evidence to suggest that the mean maintenance costs of new

buildings are different from mean maintenance costs of old buildings.

[Alternatively, if we samples are considered large, we can use the z statistic:

z

(iii)

4 4.92

0.987 ]

16.67 12.05

25

61

Sax ai xi

1

1

ai xi 30, 000 4,500*300 7,869

61

61

Page 11

Subject CT3 (Probability and Mathematical Statistics Core Technical) September 2015 Examiners Report

A, X

(iv)

Sax

Saa S xx

7,869

0.7

174, 433*724.6

61*506, 400 4,500

480, 000

0.04511

10, 640, 400

7,869

0.04511

174, 433

300 0.04511*4,500

1.59

61

4500

Generally well answered, with some errors in the calculations.

Page 12

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