An Operator of an Oil Well Has a 0

question 78

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 0,what is the actuarially fair insurance premium?

• A)$2,450,980
• B)$2,500,000
• C)$2,550,000
• D)$2,314,815
• E)$2,715,225

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Definitions:

Organizational Policy

A set of guidelines and rules established by an organization to govern its operations and decision-making processes.

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Assistance provided to individuals, usually free of charge or at a reduced rate, to help them pursue legal matters.

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Legal advice, representation, or other legal work provided without charge to individuals who cannot afford to pay for such services.

Power

The capability to shape or control the actions of others or the direction of occurrences.