1. Assume a firm owns a small warehouse. The warehouse is subject to the risk of a fire. Below is the probability distribution for losses: Loss (S) P(Loss) 0.75 10,000 0.15 15,000 0.07 20,000 0.03 0 The firm has six current risk management options it can use to manage this risk: [1] Retention with a worry value of $3,000. [2] Insurance policy with a FA of $10,000, a premium of $2,900. This option has a worry value of $2,500. [3] Insurance policy with a face amount (FA) of $12,000, a premium cost of $3,200. Also Implement a loss reduction program that costs $400 and changes the probability of a $0 loss to 78% and eliminates the potential of a $20,000 loss. All other loss probabilities stay the same. This option has a worry value of $2,000. [4] Insurance policy with a face amount (FA) of $20,000 with a premium cost of $5,000 and a deductible of $700. This option has a worry value of $600 [5] Insurance of $20,000 with a premium cost of $6,000. a. Construct a loss matrix. What is the expected cost for each option? (4 points each) b. Assume that the risk manager makes decisions based on total cost. What option would she choose? Your answer must show the calculation of the correct S amount associated with the total loss of the option you select. (4 points)