2. (10 points) (Textbook Exercise 3.7) You have the following Earned Premiums, Expected Loss Ratios, and Paid Claims data: Year Earned Premium ($,000) Expected Loss Ratio AY4 4,750 0.60 AY5 5,175 0.62 AY6 5,500 0.65 AY7 5,900 0.63 Cumulative Paid Claims ($,000) Accident year Development year 0 1 2 3 AY4 2,147 2,697 2,843 2,843 AY5 2,312 3,091 3,106 AY6 2,451 3,142 AY7 2,612 Calculate the reserve liability as of December 31, AY7 using the Bornhetter Ferguson Method. Use the mean factor model with no development past Development Year 2. 2. (10 points) (Textbook Exercise 3.7) You have the following Earned Premiums, Expected Loss Ratios, and Paid Claims data: Year Earned Premium ($,000) Expected Loss Ratio AY4 4,750 0.60 AY5 5,175 0.62 AY6 5,500 0.65 AY7 5,900 0.63 Cumulative Paid Claims ($,000) Accident year Development year 0 1 2 3 AY4 2,147 2,697 2,843 2,843 AY5 2,312 3,091 3,106 AY6 2,451 3,142 AY7 2,612 Calculate the reserve liability as of December 31, AY7 using the Bornhetter Ferguson Method. Use the mean factor model with no development past Development Year 2