The Australia North Expressway (ANE) Project is a joint venture between five major international companies. It is operated by Stamford-Raffles Consortium (ASX:SRC), and is Australia's largest oil and gas development. ANE is concerned that a major cyclone could disrupt its pipelines, which run 700 kilometres off the coast of Western Australia. In the event of a disruption, the project anticipates a loss of profits of $65 million. Suppose the likelihood of a disruption is 3% per year, and the beta associated with such a loss is 0.25. If the risk-free interest rate is 5% and the expected return of the market is 10%. Required a) What is the actuarially fair insurance premium? (5 marks) b) Describe relationship between Security Market line and Standard deviation and Capital Asset Pricing Model. (3 marks) The Australia North Expressway (ANE) Project is a joint venture between five major international companies. It is operated by Stamford-Raffles Consortium (ASX:SRC), and is Australia's largest oil and gas development. ANE is concerned that a major cyclone could disrupt its pipelines, which run 700 kilometres off the coast of Western Australia. In the event of a disruption, the project anticipates a loss of profits of $65 million. Suppose the likelihood of a disruption is 3% per year, and the beta associated with such a loss is 0.25. If the risk-free interest rate is 5% and the expected return of the market is 10%. Required a) What is the actuarially fair insurance premium? (5 marks) b) Describe relationship between Security Market line and Standard deviation and Capital Asset Pricing Model