Suppose Expanded Use of Nuclear Power Would Involve a 5

question 39

Essay

Suppose expanded use of nuclear power would involve a 5% chance of problems causing the release of enough radiation to kill 10 people and an additional 1% chance of the release of enough radiation to kill 500 people. Assume unidentified humans such as those who might die as the result of nuclear disasters are found to be worth $9 million each. If the discount rate is zero, what is the expected value of the human loss from nuclear expansion?
Suppose instead that the discount rate is 10% and the expanded use of nuclear power would certainly kill 100 people in 20 years. What is the present value of the human loss due to nuclear expansion?

---

Definitions:

Exercise Price

The predetermined price at which the holder of an option can buy (in case of a call option) or sell (in case of a put option) the underlying asset.

Stock Price

The cost of purchasing a share of a company, reflecting the market's valuation of the company's future earnings potential.

Standardized Options

Options that have been standardized by an options exchange, detailing the specific terms such as expiration date and strike price.

National Exchange

A formal marketplace where securities, commodities, derivatives, and other financial instruments are traded.