Question: An actuary at a mid sized insurance company is examining the
An actuary at a mid-sized insurance company is examining the sales performance of the company’s sales force. She has data on the average size of the policy ($) written in two consecutive years by 200 salespeople. She fits a linear model and finds the slope to be 3.00 and the R2 is 99.92%. She concludes that the predictions for next year’s policy size will be very accurate. Examine the data on the CD and comment on her conclusions.
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