Wiser/Brosius "Actuarial Model" – practice problem (Dr J Eric Brosius developed this model, which is now incorporated into the Wiser chapter in the Foundations textbook.)
You are modeling the rate of loss occurrence and reporting for a given book of business. Losses are incurred at a rate of $100,000 a year at January 1, 1997. Because of inflation, the rate of loss occurrence is increasing linearly over time, and it equals $110,000 a year at December 31, 1997.
Of the losses which occur, half (by dollar volume) are reported immediately, and half are reported evenly over the subsequent 12 months.
Which of the following expressions correctly represents losses occurring in 1997 that are reported by December 31, 1997?