Question 2 Banana Sales & Services Berhad and Pineapple Marketing Berhad owned an identical automated insert machine worth RM100,000. There is 5 percent possibility that each machine will be destroyed due to overvoltage in any year. Losses occur (if any) for either machine is an independent event. You are required to:

(a) Calculate expected losses and standard deviation for each company.

(b) If Banana and Pineapple management decided to form a pooling arrangement to share losses equally, identify the probability of each outcome and possible loss for each manufacturer after entering into the pooling arrangement.

(c) Calculate the new expected loss and standard deviation derived from the pooling arrangement.