Question 3 Risk Control (CLO 2)/ Risk Assessment (CLO 2) 20 marks

1. Acme Company has three identical manufacturing plants, one on the Texas Gulf Coast, one in southern Alabama, and one in Florida. Each plant is valued at $200 million. Acme's risk manager is concerned about the damage which could be caused by a single hurricane. The risk manager believes there is an extremely low probability that a single hurricane could destroy two or all three plants because they are located so far apart. What is the maximumpossibleloss associated with a single hurricane? (3 marks)
2. Barb, who is self-employed, is the main breadwinner for her family. Barb does not have disability income insurance because she has never stopped to consider the impact of a long-term disability upon her family. Is Barb's treatment of the risk of disability best described as Active Retention or Passive Retention? (3 marks)
3. The amount of time a student taking statistics spends on studying for a test is normally distributed. If the average time spent studying is 12 hours and the standard deviation is 4 hours, what is the probability that a student will spend more than 8 hours studying? (7 marks)
4. In a particular pain clinic, 10% of patients are prescribed narcotic pain killers. Overall, five percent of the clinic's patients are addicted to narcotics (including pain killers and illegal substances). Out of all the people prescribed pain pills, 8% are addicts. If a patient is an addict, what is the probability that they will be prescribed pain pills? (7 marks)