Society of Actuaries (SOA) PA Practice Exam

What type of summary would you generate when analyzing a binary target and a factor variable using R?

1. A table of means and medians

2. A scatter plot of the two variables

3. A summarized table showing counts of zeros and ones

4. A bar chart for the binary target

The correct answer is: A summarized table showing counts of zeros and ones

When analyzing a binary target variable against a factor variable, generating a summarized table that shows counts of zeros and ones is highly effective. This type of summary allows you to see how the binary outcomes are distributed across the different levels of the factor variable. For example, if the factor variable represents groups, this table would indicate how many instances in each group correspond to each binary outcome. This can uncover important patterns in the data, such as whether certain groups have higher frequencies of one outcome over the other, supporting further analysis and decision-making processes. Other approaches, like creating a table of means and medians, typically pertain to continuous variables rather than binary outcomes, which have fixed values that do not allow for meaningful averaging. A scatter plot is best used for continuous variables rather than for a binary target since it requires numeric representation for both axes. While a bar chart can provide a visual interpretation of the binary target, it may not effectively summarize the relationship between the target and the factor variable in the same detail as the counts do. Therefore, the summarized table of zeros and ones offers the most informative understanding of the data relationship in this context.