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MBA,MCS,M.phil
Devry University
Jan-2008 - Jan-2011
MBA,MCS,M.Phil
Devry University
Feb-2000 - Jan-2004
Regional Manager
Abercrombie & Fitch.
Mar-2005 - Nov-2010
Regional Manager
Abercrombie & Fitch.
Jan-2005 - Jan-2008
Genentech’s main facility is located in South San Francisco. Suppose that Genentech would experience a direct loss of $450 million in the event of a major earthquake that disrupted its operations. The chance of such an earthquake is 2% per year, with a beta of - 0.5.
If the risk-free interest rate is 5% and the expected return of the market is 10%, what is the
actuarially fair insurance premium required to cover Genentech’s loss?
Suppose the insurance company raises the premium by an additional 15% over the amount calculated in part (a) to cover its administrative and overhead costs. What amount of finan- cial distress or issuance costs would Genentech have to suffer if it were not insured to justify purchasing the insurance?
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