2. Kramerica Company has a building worth $1,000,000. The building is subject to physical damages and total destruction as the result of fire. Kramerica has the following probability distribution of ALL potential fire losses that are possible for its building:

Loss Amount ($) Probability of Loss

$0 0.75

$10,000 0.21

$100,000 0.035

$1,000,000. ?

Kramerica is considering the following risk management options:

[1] Retention

[2] Partial Insurance

o Face Amount = $90,000

o Premium = $7,000

[3] Deductible Insurance

o Face Amount = $1,000,000

o Deductible per occurrence = $2,500

o Premium = $12,500

[4] Full Insurance

o Face Amount = $1,000,000

o Premium = $17,000

What is the Total Cost of each of the risk management options under consideration by Kramerica? (Hint: I did NOT forget to list the Worry Value on the problemall you need is a variable that represents the Worry Value for Total Cost!) [4 points]