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Exercise

ABy Admin
May 07'23

Answer

Solution: E

Let X and Y denote the annual cost of maintaining and repairing a car before and after the 20% tax, respectively. Then Y = 1.2X and Var[Y] = Var[1.2X] = (1.2)2 Var[X] = (1.2)2(260) = 374.4.


Copyright 2023. The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.

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