a) Calculate the

i) expected value

ii) variance

iii) standard deviaton for the following probability distribution for automobile damages.

Possible outcomes for damages Probability

$0 0.40

$500 0.35

$1000 0.15

$7000 0.08

$12000 0.02

b) i) Assume the chance of loss is 3 percent for two different fleets of trucks. Explain how it is possible that objective risk for both fleets can be different even though the chance of loss is identical.

ii) Why must risk management decisions be reviewed regularly?