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Problem As the owner of a landmark Chicago skyscraper, you decide to purchase insurance that will pay $1 billion in the event the building is

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Problem As the owner of a landmark Chicago skyscraper, you decide to purchase insurance that will pay $1 billion in the event the building is destroyed by terrorists. Suppose the likelihood of such a loss is 0.1%, the risk-free interest rate is 4%, and the expected return of the market is 10%. If the risk has a beta of zero, what is the actuarially fair insurance premium? What is the premium if the beta of terrorism insurance is -2.525

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