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Society Of Actuaries (SOA) Actuarial Certification Exam

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An insurance company observes that the average claim amount for a policyholder is $1,200, based on past experience. The population mean is $1,000 with a variance of $400. What is the Bayesian estimate of the claim amount if the weight of credibility (Z) is 0.6?
Correct Answer:
$$1,120

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