A Restaurant Decides to Insure Itself Against the Risk of Fire.The

A restaurant decides to insure itself against the risk of fire.The insurance company estimates that the probability of a fire is 0.1% and the expected payment should a fire occur is $10 million.If the risk-free rate is 4%,the expected return on the market is 9%,and the beta of the risk is 0,what is the actuarially fair insurance premium?

A) $9,016
B) $9,174
C) $9,524
D) $9,615
E) $10,000

Correct Answer:

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