Question
A firm's CEO, Jason van Stathemnathem, has discussed an insurance offer against fire valued at $51,000/yr. Jason estimates that he could lose about 82% of
A firm's CEO, Jason van Stathemnathem, has discussed an insurance offer against fire valued at $51,000/yr. Jason estimates that he could lose about 82% of his assets in the event of a fire. His assets are valued at $10,000,000.
If he pays the insurance, there will only be a loss of around 14%.
Note that insurance payments do not affect the rate of fires. However, Jason has no good data on the likelihood of such an event.
What annual rate of occurrence would result in a break-even scenario? (Zero CBA) Give your answer in terms of the number of years between fires for a break even point. In other words, how many years between attacks for a break-even proposition? WARNING, DO NOT give the answer in attacks per year, but as the average number of years between attacks.
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