AC CT3 PMA 18v2

AC – CT3 – P MA – 18
Mock Exam A
ActEd Study Materials: 2018 Examinations
Subject CT3
Contents
Mock Exam A Questions
If you think that any pages are missing from this pack, please contact ActEd’s admin team
by email at ActEd@bpp.com.
How to use Mock Exam A
Guidance on how and when to use Mock Exam A is set out in the
Study Guide for the 2018 exams. The recommended date and deadline date for
submission of Mock Exam A are listed on a summary page at the back of this pack.
We strongly recommend that you work to the recommended date.
Please note that we only accept the current version of Mock Exam A for marking, ie you
can only submit this mock exam in the sessions leading to the 2018 exams. However, if
you wish to submit your script for marking in 2018, but do not have the latest version of
Mock Exam A, please let us know and we will send, free of charge, an up-to-date version for
you to attempt and submit.
Important: Copyright Agreement
This study material is copyright and is sold for the exclusive use of the purchaser. You
may not hire out, lend, give out, sell, store or transmit electronically or photocopy any
part of it. You must take care of your material to ensure that it is not used or
copied by anybody else. By opening this pack you agree to these conditions.
The Actuarial Education Company © IFE: 2018 Examinations

All study material produced by ActEd is copyright and is sold
for the exclusive use of the purchaser. The copyright is owned
by Institute and Faculty Education Limited, a subsidiary of
the Institute and Faculty of Actuaries.
Unless prior authority is granted by ActEd, you may not hire

out, lend, give out, sell, store or transmit electronically or
photocopy any part of the study material.
You must take care of your study material to ensure that it is

not used or copied by anybody else.
Legal action will be taken if these terms are infringed. In

addition, we may seek to take disciplinary action through the
profession or through your employer.
These conditions remain in force after you have finished using

the course.
© IFE: 2018 Examinations The Actuarial Education Company

Subject CT3: Mock Exam A
2018 Examinations
Time allowed: 3 hours, plus 15 minutes reading time
Instructions to the candidate
1. Please:
– attempt all of the questions, as far as possible under exam conditions
– begin your answer to each question on a new page
– leave at least 2cm margin on all borders
– write in black ink using a medium-sized nib because we will be unable to mark
illegible scripts
– note that mock exam marking is not included in the price of the Course
Materials. Please purchase a Marking Voucher before submitting your script.
– note that we only accept the current version of mock exams for marking, ie you
can only submit this mock exam in the sessions leading to the 2018 exams.
2. Please do not:
– use headed paper
– use highlighting in your script.
At the end of the mock exam

If your script is being marked by ActEd, please follow
the instructions on the reverse of this page.
In addition to this paper, you should have available actuarial tables

and an electronic calculator.

Submission for marking
You should aim to submit this script for marking by the recommended submission date. The
recommended and deadline dates for submission of this mock exam are listed on the
summary page at the back of this pack and on our website at www.ActEd.co.uk.
Scripts received after the deadline date will not be marked, unless you are using a Marking
Voucher. It is your responsibility to ensure that scripts reach ActEd in good time. If you are
using Marking Vouchers, then please make sure that your script reaches us by the Marking
Voucher deadline date to give us enough time to mark and return the script before the exam.
When submitting your script, please:
 complete the cover sheet, including the checklist
 scan your script, cover sheet and Marking Voucher to a pdf document, then email it to:
ActEdMarking@bpp.com
 do not submit a photograph of your script
 do not include the question paper in the scan.
In addition, please note the following:
 Please title the email to ensure that the subject and mock exam are clear eg “CT3 Mock
Exam A No. 12345”, inserting your ActEd Student Number for 12345.
 The mock exam should be scanned the right way up (so that it can be read normally
without rotation) and as a single document. We cannot accept individual files for each
page.
 Please set the resolution so that the script is legible and the resulting PDF is less than
3 MB in size. The file size cannot exceed 4 MB.
 Do not protect the PDF in any way (otherwise the marker cannot return the script to
ActEd, which causes delays).
 Please include the “feedback from marker” sheet when scanning.
 Before emailing to ActEd, please check that your scanned mock exam includes all
pages and conforms to the above.

Subject CT3: Mock Exam A
2018 Examinations
Please complete the following information:
Name: Number of following pages: _______
Please put a tick in this box if you have solutions

and a cross if you do not:
Please put a tick in this box if you used the

allowed reading time:
ActEd Student Number (see Note below):
Please tick here if you are allowed extra time or
other special conditions in
the profession’s exams:
Time to do mock
Note: Your ActEd Student Number is printed on all (see Note below): _____ hrs _____ mins
personal correspondence from ActEd. Quoting it will help
us to process your scripts quickly. If you do not know your Under exam conditions
ActEd Student Number, please email us at (delete as applicable): yes / nearly / no
ActEd@bpp.com.
Note: If you take more than 3 hours, you should
Your ActEd Student Number is not the same as your indicate how much you completed within this time
IFoA Actuarial Reference Number or ARN. so that the marker can provide useful feedback on
your chances of success in the exam.
Score and grade for this mock exam (to be completed by marker):
Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12 Q13 Total
=_____%
3 4 4 5 5 5 5 6 6 7 15 17 18 100
Grade: A B C D E Marker’s initials: ________
Please tick the following checklist so that your script can be marked quickly. Have you:
[ ] Checked that you are using the latest version of the mock exam, ie 2018 for the
sessions leading to the 2018 exams?
[ ] Written your full name in the box above?
[ ] Completed your ActEd Student Number in the box above?
[ ] Recorded your attempt conditions?
[ ] Numbered all pages of your script (excluding this cover sheet)?
[ ] Written the total number of pages (excluding the cover sheet) in the space above?
[ ] Included your Marking Voucher?
Please follow the instructions on the previous page when submitting your script for marking.

Feedback from marker
Notes on marker’s section
The main objective of marking is to provide specific advice on how to improve your chances
of success in the exam. The most useful aspect of the marking is the comments the marker
makes throughout the script, however you will also be given a percentage score. Based on
this score, the marker assigns a grade representing how this script would have fared in an
exam. The grades are as follows:
A = Clear Pass B = Probable Pass C = Borderline D = Probable Fail E = Clear Fail
We aim for our ActEd Mocks to be realistic and consistent with the IFoA examinations, as
such the notional pass mark for this Mock Exam is around 60%.
Please note that you can provide feedback on the marking of this mock exam at:
www.ActEd.co.uk/marking

CT3: Mock Exam A – Questions Page 1
1 The random variable, X , has a normal distribution with mean  and variance 100. In
a test of:
H 0 :   20 vs H1 :   30
it is decided to reject H 0 in favour of H1 if the sample mean, X , is greater than 25.

Determine the smallest sample size required to make the probability of a Type I error
less than 0.02. [3]
2 (i) Define the F distribution in terms of the ratio of two other distributions. [1]
(ii) Deduce that if random samples of size n1 and n2 are taken from independent
normal populations with variances  12 and  22 then:
S12  12
~ Fn1 1, n2 1
S 22  22
where S1 and S 2 denote the respective sample standard deviations. [1]
(iii) Given that the samples are of size n1  11 and n2  19 and that they come from
normal populations with equal variances, calculate approximately:
 S2 
P  12  2.9 [2]
 S2 
[Total 4]
3 A single sample value of 2 is obtained from a Poisson distribution with mean  .

Determine a 90% confidence interval for  , using tables of “Probabilities for the
Poisson distribution” or otherwise. [4]

Page 2 CT3: Mock Exam A – Questions
4 The random variables U and V have joint density function given by:
1
f (u , v)  (3u  5v), 0  u  1, 0  v  1
4
(i) State, with reasons, whether or not the random variables U and V are
independent. [1]
(ii) Determine the conditional density function of U given V  v . [2]
(iii) Hence determine the conditional expectation E (U | V  v) . [2]

[Total 5]
5 A set of data consists of thirty values of 8 and twenty values of 12.
(i) Calculate the mean and standard deviation of this data set. [3]
(ii) Explain, without calculation, what would happen to the mean, standard deviation
and skewness if ten 3’s were added to this data set. [2]
[Total 5]
6 A random sample of 20 observations from a normal distribution gives  x  52 and
 ( xi  x )2  48.2 . Obtain a 95% confidence interval for:
(i)  , the true population mean [3]
(ii)  2 , the true population variance. [2]

[Total 5]

7 A random sample of 4 children is taken from a large population that consists of an equal
number of boys and girls.
(i) Calculate the probability that the sample contains 2 or more boys. [1]
One hundred random samples, each of 4 children, are taken independently from a large
population that consists of an equal number of boys and girls.
(ii) Use a suitable approximation to calculate the probability that at least 60 of the
samples contain 2 or more boys. [4]
[Total 5]
8 A man commutes to London by train every working day. He can catch the “early” train
or the “late” train to get to work. The probability that the “early” and “late” trains arrive
in London on time for work are 0.6 and 0.55, respectively. The probability that he
makes it to the station on time to catch the early train is 0.7.
(i) Given that he arrives in London on time, calculate the probability that he caught
the “late” train. [3]
A new “mid-morning” service is added that arrives in London on time for work with
probability 0.57. The probability that the man catches the “early”, “mid-morning” or
“late” trains are now 0.7, 0.2 and 0.1, respectively.
(ii) Given that he arrives in London on time, calculate the probability that he caught
the “mid-morning” train. [3]
[Total 6]
9 An insurer knows from past experience that, for a particular risk, claim sizes have a
gamma distribution with parameters   74 and   0.5 , and the number of claims per
month has a Poisson distribution with mean 17. It is known that the claim size and
number of claims are independent and that claims are independent of each other.
(i) By writing down an expression for the moment generating function of S (the
aggregate claims in a year), show that the cumulant generating function is:
 
204 (1  2t ) 74  1 [2]
(ii) Hence, calculate the coefficient of skewness of S . [4]

[Total 6]

10 (i) Show, using moment generating functions, that if X1 , X 2 , , X n are

independent and identically distributed random variables with X i ~ Exp( ) ,
n
then  X i ~ gamma(n,  ) .
i 1
(You may assume the moment generating function of X .) [3]
(ii) Claims arrive at an insurance office at an average rate of 10 per day, and the
arrival of claims is modelled as a Poisson process.
(a) State the distribution of the waiting time (in days) to the arrival of the
first claim.
(b) Calculate the probability that the time until the arrival of the fourth claim
is more than half a day. [4]
[Total 7]

11 A random variable X has the probability density function shown in the diagram below.
The function is a decreasing linear function on the interval (0,  ) .
f(x)
x
0 
(i) Show that the probability density function for X is given by:
2(  x)
f ( x)  , 0  x  [2]
2
(ii) Derive the mean and variance of X in terms of  . [3]
(iii) A random sample of size 5 from this distribution yields the values:
0.8, 1.3, 1.4, 1.7, 10.0
Derive a method of moments estimate for  based on these data. [2]
(iv) Explain carefully why the method of moments estimate for  derived in part
(iii) above cannot be a maximum likelihood estimate. [2]
(v) Write down the likelihood function for  based on the sample given above.
Hence show that the maximum likelihood estimate for  lies between 12 and
12.5, and determine its value correct to one decimal place. [6]
[Total 15]

12 The scores (as percentages) of ten students in their CT3 and CT1 mocks are as follows:
Student 1 2 3 4 5 6 7 8 9 10
Subject CT3 ( x) 27 35 47 56 58 73 79 83 89 92
Subject CT1 ( y ) 35 26 67 45 64 89 80 49 93 74
 x  639 ,  x 2  45,507 ,  y  622 ,  y 2  43,358 ,  xy  43, 205

A plot of this data set is shown below:
Mock scores
100
80
CT1 score
60
40
20
0
0 20 40 60 80 100
CT3 score
(i) Comment on the suitability of fitting a model of the form yi     xi  ei . [1]
(ii) Calculate estimates of the intercept and gradient parameters. [3]
(iii) Carry out a test to establish if  , the gradient parameter for the whole
population, exceeds 0.5. [3]
(iv) Explain in general terms what the coefficient of determination tells us about a
regression model. Calculate the coefficient for this model and comment on its
value. [3]
(v) Calculate the correlation coefficient and test to see if this sample could have
come from a population with correlation coefficient 0.9. [3]
(vi) Calculate a 95% confidence interval for the score in the Subject CT1 mock for
an individual student who achieved 50% in their Subject CT3 mock. [4]
[Total 17]

13 Four different insurance companies were asked to provide data regarding the number of
claims of a particular type received each month by their claims departments. The
results were as follows:
Company 1 6, 11, 7, 3
Company 2 4, 6, 5
Company 3 4, 6, 5, 7, 8, 4
Company 4 8, 10, 9, 8, 6
Consider the model:
Yij     i  eij i  1, 2, 3, 4; j  1, 2, , ni eij ~ N (0, 2 )
where Yij is the j th result for the i th company, ni is the number of responses available
for Company i , the eij are independent and identically distributed and  ni i  0 .
i
(i) Calculate the least squares estimates of  and  i , i  1, 2, 3, 4 . [3]
(ii) Perform an analysis of variance on these results stating clearly your assumptions
and your conclusion. [7]
(iii) Calculate a point estimate and a 95% confidence interval for the underlying
common variance,  2 , of the monthly claim numbers in each of the four
companies. [3]
(iv) State the values of yi for i  1, 2,3, 4 , list the means in order and, using a 5%
significant level, illustrate the non-significant pairs using suitable underlining. [5]
[Total 18]
END OF MOCK EXAM

All study material produced by ActEd is copyright and is sold
for the exclusive use of the purchaser. The copyright is owned
by Institute and Faculty Education Limited, a subsidiary of
the Institute and Faculty of Actuaries.
Unless prior authority is granted by ActEd, you may not hire

out, lend, give out, sell, store or transmit electronically or
photocopy any part of the study material.
You must take care of your study material to ensure that it is

not used or copied by anybody else.
Legal action will be taken if these terms are infringed. In

addition, we may seek to take disciplinary action through the
profession or through your employer.
These conditions remain in force after you have finished using

the course.

Assignment deadlines v2
For the session leading to the April 2018 exams – CT Subjects
Marking vouchers
Subjects Assignments Mocks
CT1, CT2, CT3, CT6, CT7 21 March 2018 27 March 2018
CT4, CT5, CT8 27 March 2018 4 April 2018
Series X Assignments
Recommended Final deadline

Subjects Assignment
submission date date
CT1, CT2, CT3, CT6, CT7 22 November 2017 17 January 2018

X1
CT4, CT5, CT8 29 November 2017 24 January 2018
CT1, CT2, CT3, CT6, CT7 13 December 2017 7 February 2018

X2
CT4, CT5, CT8 20 December 2017 14 February 2018
CT1, CT2, CT3, CT6, CT7 24 January 2018 28 February 2018

X3
CT4, CT5, CT8 31 January 2018 7 March 2018
CT1, CT2, CT3, CT6, CT7 21 February 2018 14 March 2018

X4
CT4, CT5, CT8 28 February 2018 21 March 2018
Mock Exams

Subjects
CT1, CT2, CT3, CT6, CT7 14 March 2018 27 March 2018
CT4, CT5, CT8 21 March 2018 4 April 2018
We encourage you to work to the recommended submission dates where possible.
If you submit your mock on the final deadline date you are likely to receive your script back less than a week
before your exam.

Assignment deadlines v2
For the session leading to the September 2018 exams – CT Subjects
Marking vouchers
Subjects Assignments Mocks
CT1, CT4, CT6, CT7 22 August 2018 29 August 2018
CT2, CT3, CT5, CT8 29 August 2018 5 September 2018
Series X Assignments

Subjects Assignment
CT1, CT4, CT6, CT7 30 May 2018 27 June 2018

X1
CT2, CT3, CT5, CT8 6 June 2018 4 July 2018

X2
CT1, CT4, CT6, CT7 11 July 2018 1 August 2018

X3

X4
Mock Exams

Subjects
CT2, CT3, CT5, CT8 22 August 2018 5 September 2018
We encourage you to work to the recommended submission dates where possible.
If you submit your mock on the final deadline date you are likely to receive your script back less than a week
before your exam.

AC CT3 PMA 18v2

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ActEd Study Materials: 2018 Examinations

Mock Exam A Questions

How to use Mock Exam A

Important: Copyright Agreement

The Actuarial Education Company © IFE: 2018 Examinations

Unless prior authority is granted by ActEd, you may not hire

You must take care of your study material to ensure that it is

Legal action will be taken if these terms are infringed. In

These conditions remain in force after you have finished using

© IFE: 2018 Examinations The Actuarial Education Company

Time allowed: 3 hours, plus 15 minutes reading time

Instructions to the candidate

At the end of the mock exam

In addition to this paper, you should have available actuarial tables

The Actuarial Education Company © IFE: 2018 Examinations

When submitting your script, please:

 complete the cover sheet, including the checklist

 do not submit a photograph of your script

 do not include the question paper in the scan.

In addition, please note the following:

 Please include the “feedback from marker” sheet when scanning.

© IFE: 2018 Examinations The Actuarial Education Company

Name: Number of following pages: _______

Please put a tick in this box if you have solutions

Please put a tick in this box if you used the

Grade: A B C D E Marker’s initials: ________

The Actuarial Education Company © IFE: 2018 Examinations

Notes on marker’s section

A = Clear Pass B = Probable Pass C = Borderline D = Probable Fail E = Clear Fail

© IFE: 2018 Examinations The Actuarial Education Company

it is decided to reject H 0 in favour of H1 if the sample mean, X , is greater than 25.

where S1 and S 2 denote the respective sample standard deviations. [1]

3 A single sample value of 2 is obtained from a Poisson distribution with mean  .

The Actuarial Education Company © IFE: 2018 Examinations

(ii) Determine the conditional density function of U given V  v . [2]

(iii) Hence determine the conditional expectation E (U | V  v) . [2]

5 A set of data consists of thirty values of 8 and twenty values of 12.

6 A random sample of 20 observations from a normal distribution gives  x  52 and

 ( xi  x )2  48.2 . Obtain a 95% confidence interval for:

(i)  , the true population mean [3]

(ii)  2 , the true population variance. [2]

© IFE: 2018 Examinations The Actuarial Education Company

(ii) Hence, calculate the coefficient of skewness of S . [4]

The Actuarial Education Company © IFE: 2018 Examinations

10 (i) Show, using moment generating functions, that if X1 , X 2 , , X n are

(You may assume the moment generating function of X .) [3]

© IFE: 2018 Examinations The Actuarial Education Company

(ii) Derive the mean and variance of X in terms of  . [3]

0.8, 1.3, 1.4, 1.7, 10.0

Derive a method of moments estimate for  based on these data. [2]

The Actuarial Education Company © IFE: 2018 Examinations

 x  639 ,  x 2  45,507 ,  y  622 ,  y 2  43,358 ,  xy  43, 205

(i) Comment on the suitability of fitting a model of the form yi     xi  ei . [1]

(ii) Calculate estimates of the intercept and gradient parameters. [3]

© IFE: 2018 Examinations The Actuarial Education Company

Consider the model:

Yij     i  eij i  1, 2, 3, 4; j  1, 2, , ni eij ~ N (0, 2 )

(i) Calculate the least squares estimates of  and  i , i  1, 2, 3, 4 . [3]

END OF MOCK EXAM

The Actuarial Education Company © IFE: 2018 Examinations

Unless prior authority is granted by ActEd, you may not hire

You must take care of your study material to ensure that it is