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Genentechs main facility is located in South San Francisco. Suppose that Genentech would experience a direct loss of $450 million in the event of a
Genentechs main facility is located in South San Francisco. Suppose that Genentech would experience a direct loss of $450 million in the event of a major earthquake that disrupted its operations. The chance of such an earthquake is 2% per year, with a beta of 0.5. If the risk-free interest rate is 5% and the expected return of the market is 10%, what is the actuarially fair insurance premium required to cover Genentechs loss?
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