A midsize corporation is considering purchase of Cyber Liability Insurance Policy. The following table provides the probability distribution of yearly cost coverage associated with different level of Cyber Security IT network interruptions for this corporation.

Type of Risks Probability Cost Coverage

None 0.90 $0

Minor: 0.050 $70,000

Moderate: 0.030 $500,000

Major 0.019 $2,000,000

Catastrophic: 0.001 $10,000,000

a-What is the expected cost of this policy for the insurance company? What is the Standard deviation of cost?Hint: Use Excel.

b-If the cost of purchasing a network interruption insurance is $100,000, calculate the expected gain or loss for a corporation that purchase this insurance. Would you recommend purchasing this insurance? Why?

c-Would you a buy this insurance policy at cost of $50,000? Why?