1) Rincon Company has production facilities in Rincon and Aguada. The probability that in any given year a fire will damage the production facility in Rincon is 5 percent. The probability that in any given year a fire will damage the Aguada production facility is 4 percent. What is the probability that BOTH production facilities will be damaged by fire in any given year?

a. 0.20 percent

b. 2.00 percent

c. 4.50 percent

d. 9.00 percent

2) Which of the following types of loss exposures may be appropriately handled through the purchase of insurance?

I. High-frequency, low-severity

II. Low-frequency, low-severity

Select one:

a. I only

b. II only

c. both I and II

d. neither I nor II