Genentech's main facility is located in South San Francisco. Suppose that Genentech would experience a direct loss of $300 million in the event of a major earthquake disrupting its operations. The chance of such an earthquake is 2.5% per? year, with a beta of negative 0.30−0.30.
a. If the? risk-free interest rate is 6.0%?, and the expected return of the market is 12.0%?,
what is the actuarially fair insurance premium to cover? Genentech's loss $_______ in millions round to two decimal places
b. Suppose the insurance company raises the premium by an additional 12%
over the amount calculated in part (a?) to cover its administrative and overhead costs. What amount of financial distress or issuance costs would Genentech have to suffer $______ in millions (round to two decimal places) if it were not insured to justify purchasing the? insurance?