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QUESTION 2 Health insurance is defined as insurance coverage that pays for medical expenses incurred by the insured. Cik Aminah Baba who is an actuary,

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QUESTION 2 Health insurance is defined as insurance coverage that pays for medical expenses incurred by the insured. Cik Aminah Baba who is an actuary, would like to study the relation between the insurance claim (RM'00) by customers and their age in years. The data below are gathered from 12 customers and a simple linear regression model with normal errors was employed: Customer Age Claim 19 168.85 18 17.26 28 44.49 33 219.84 32 38.67 31 37.57 46 82.41 8 37 72.82 37 64.06 10 60 289.23 11 25 27.21 12 62 278.09 a) Using the matrix methods, obtain the estimated regression function. Calculate all the coefficient up to four decimal places. (5 marks) b) Interpret the gradient of the regression line. (2 marks) c) Justify whether the model is useful for forecasting. Use 5% significance level. (Hint: SSE=57778.162) (7 marks)

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