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Suppose that your firm's (pre-loss and pre-tax) earnings one period from now will be $1,000. However, earnings are subject to the following loss distribution: B.

Suppose that your firm's (pre-loss and pre-tax) earnings one period from now will be $1,000.
However, earnings are subject to the following loss distribution:

 
B. What is the net present value of purchasing an actuarially fair, full coverage insurance policy.

Loss (Ls) $1,000 $600 $300 $0 Probability (ps) 20% 20% 20% 40%

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