Suppose Margo Lago wants to insure a building worth $590 million. The probability of loss is 1.27 percent in one year, and the relevant discount rate is 2 percent.

In calculating insurance premiums, the actuarially fair insurance premium is the premium that results in a zero NPV for both the insured and the insurer. As such, the present value of the expected loss is the actuarially fair insurance premium.

a. What is the actuarially fair insurance premium that Margo Lago should pay to insure the building above? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole dollar, e.g., 1,234,567.)

b. Suppose Margo Lago can make modifications to the building that will reduce the probability of a loss to .90 percent. How much would Margo Lago be willing to pay for these modifications? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole dollar, e.g., 1,234,567.)