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

Multiple Choice

A firm estimates that the loss from a weather-related closing is $10 million and the probability of occurrence is 0.1% 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 0.5,compute the insurance premium.

A) $8198
B) $8918
C) $9259
D) $9598
E) $8574