Scenario 17.3 Consider the Following Information

question 125

Multiple Choice

Scenario 17.3
Consider the following information:
The probability of a fire in a factory without a fire prevention program is 0.01. The probability of a fire in a factory with a fire protection program is 0.001. If a fire occurred, the value of the loss would be $300,000. A fire prevention program would cost $80 to run.
-Refer to Scenario 17.3. If there is no insurance and no fire protection program in place, the expected loss from fire for this company is:

• A) $0.
• B) $300.
• C) $3,000.
• D) $6,000.
• E) $300,000.

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Definitions:

Principal

The initial amount of a loan or investment, excluding any interest or dividends.

Agent

An individual or entity authorized to act on behalf of another.

Contract

A legally binding agreement between two or more parties that outlines obligations each party must fulfill.

Liable

Being legally responsible for something, especially in the context of debts or legal wrongs.