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Question: genentechs main facility is located in south san francisco suppose...

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​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 −0.25.

a. If the​ risk-free interest rate is 5.5%​, and the expected return of the market is 11.5%​,

what is the actuarially fair insurance premium to cover​ Genentech's loss?b. Suppose the insurance company raises the premium by an additional 18%

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 if it were not insured to justify purchasing the​ insurance?

a. If the​ risk-free interest rate is 5.5%​, and the expected return of the market is 11.5%​,

what is the actuarially fair insurance premium to cover​ Genentech's loss?The actuarially fair insurance premium to cover​ Genentech's loss is _________

million. ​ (Round to two decimal​ places.)

b. Suppose the insurance company raises the premium by an additional 18% 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 if it were not insured to justify purchasing the​ insurance? The amount of financial distress or issuance costs is

​___________million. ​ (Round to two decimal​ places.)

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