A Firm Estimates That the Loss from a Weather-Related Closing

question 107

Multiple Choice

A firm estimates that the loss from a weather-related closing is $20 million and the probability of occurrence is 0.2% over the next year.If claims are paid at the end of the year,the annual risk-free rate is 5%,the market risk premium is 6%,and the beta of these losses is 0.7,compute the insurance premium.

• A)$28,198
• B)$36,630
• C)$37,259
• D)$39,491
• E)$38,175

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