b) There are two properties owned by 2 business owners in different locations with the following details
Property Cost Probability of loss
Warehouse – Owner 1 30 000.00 25%
Shopping mall – Owner 2 20 000.00 25%
Total 50 000.00
Assuming the loss to either building is an independent event
Required:
a) Expected value and Standard Deviation of a loss for each property [4 Marks]
b) Assume that the owners instead pool (combine) their loss exposures, and each agrees to pay an equal share of any loss that might occur. Find the expected loss and standard deviation. Comment your answer in comparison to those in (a). [6 marks]
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