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Your insurance agent offers you a fire damage policy for $200. The policy covers your house that is worth $150,000. Suppose the probability of

Your insurance agent offers you a fire damage policy for $200. The policy covers your house that is worth $150,000. Suppose the probability of a fire (that destroys the house completely) during the year is 0.0001 and consider the insurance policy as a security. a. What is the expected holding-period return (HPR)? b. What is the standard deviation of its HPR?

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