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
Correct Answer:
Verified
Q14: An operator of an oil well has
Q15: If the price of insurance equals the
Q16: Adverse selection is a market friction that
Q17: _ is one of the most common
Q18: The _ is the annual fee a
Q20: Insurance companies diversify their risks by pooling
Q21: Insurance that compensates for the loss or
Q22: Which of the following best describes how
Q23: The risk of fire at a car
Q24: Because insurance provides cash to the firm
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents