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 $40 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 0.9,compute the insurance premium.

A) $28,276
B) $28,672
C) $36,232
D) $39,491
E) $32,448