Assume that you are the risk manager of an organization that owns a warehouse that is valued at $500,000. The following is the loss distribution associated with the possibility of a steamboiler explosion at your warehouse. Further assume that you think the dollar value of the maximum probable loss to a building as a result of a steam-boiler explosion is $400,000, but your assistant estimates it to be $300,000. You both agree that the maximum possible loss is the complete destruction of the building.

Dollar AmountProbability

1-9,0000.9

10,000-50,0000.06

50,001-100,0000.03

100,001-300,0000.008

300,001-400,0000.0015

400,001-500,0000.0005

1.00

Define Maximum Probable Loss.