An Operator of an Oil Well Has a 0

question 83

Multiple Choice

An operator of an oil well has a 0.5% chance of experiencing a catastrophic failure.This failure will cost the operator $500 million.If the risk-free rate is 2%,the expected return on the market is 8%,and the beta of the risk is -1.2,what is the actuarially fair insurance premium?

• A)$2,500,000
• B)$2,637,131
• C)$2,550,000
• D)$2,753,304
• E)$2,145,000

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Definitions:

Axis

In architecture and art, a straight line that often serves as a fundamental organizing principle in the design and layout of buildings and landscapes.

Cosmic Mountain

A mythological motif found in various cultures, symbolizing the center of the world and a connection between the earth and the heavens.

Buddhist Monastery

A community or complex where monks or nuns live, work, and worship, dedicated to the practice and study of Buddhism.

Sanchi

An ancient Buddhist complex in India known for its Great Stupa.