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Consider the following three events: 1) An insurance company loses $5 billion due to an earthquake in California. 2) An auto manufacturer loses $5 billion
Consider the following three events: 1) An insurance company loses $5 billion due to an earthquake in California. 2) An auto manufacturer loses $5 billion from a lawsuit relating to safety flaws of a new car design. 3) A food processing firm loses $5 billion from a hedging trader speculating in the coffee and sugar markets. You have equal investments in the three firms. Which loss or losses are you more concerned about? Why or why not are you concerned? Are there any risk management issues you can point to in these firms?
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