Assume that the daily probability of a major earthquake in Los Angeles is 0.07 percent. The chance that your computer center will be damaged during such a quake is 5 percent. If the center is damaged, the estimated damage to the computer center will be $4.0 million.
a. Calculate the expexted loss in dollars.
b. An insurance agent is willing to insure your facility for an annual fee of $25,000. Analyze the offer, and discuss wether to accept it.