RMI 2101 Lecture Notes - Lecture 7: Manaca, European Cooperation In Science And Technology, Decstation
12 Mar 2018
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Document Summary
Manaca company owns a small office building worth ,000. Manaca faces the risk of fire which would completely destroy their building. The probability of a fire is known to be 5%. Manaca is considering the following risk management options to address the risk of fire to their building: [2] full insurance for a premium of ,000. [4] safety program + full insurance [premium falls to ,000] The cost of the safety program is . It has the impact of lowering the probability of a fire from 5% to 3%. However, if a fire does occur it is still a total loss. Afp = p* (100,000)*(0. 03) + (0)*(0. 97) = ,000. Assume art"s worry value for retention (wvr) is ,000 and for retention and safety (wvrs) is ,200. Make sure that you show all calculations and clearly define. Total cost of full insurance: ,000+0 = ,000. Total cost of safety program + full insurance = ,600.
