A Firm Wishes to Buy Fire Insurance at Its Plant

question 108

Multiple Choice

A firm wishes to buy fire insurance at its plant.The loss in case of fire is estimated to be $20 million and the probability of occurrence is 0.1% over the next year.If claims are paid at the end of the year and the annual risk-free rate is 10%,compute the insurance premium.

• A)$15,304
• B)$16,364
• C)$18,182
• D)$19,234
• E)$17,175

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Definitions:

Anxiety

An emotion of stress, discomfort, or fear, usually in anticipation of a forthcoming event or an outcome that is not yet determined.

Avoidance

A behavior or strategy aimed at preventing negative outcomes or interactions.

Positive Forces

Influential factors or elements that contribute to positive outcomes, growth, or constructive change.

Relationship

A connection, association, or involvement between people, which can range from friendships and family bonds to romantic partnerships.