Principles of Risk and Insurance

1. (1) What are the five components of cost of risk? How do they relate to one another? (2) Suppose in a firm, the probability of worker injury is- 1/20. The losses from an injury is $100,000. Suppose the cost of residual uncertainty is $3,000 and the cost from other elements of cost of risk is zero. The value of firm without risk is $2 million. What is the value of the firm providing given information? (3) Suppose the firm purchases a full insurance, costing $7,000. What is the value of the firm