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Scenario: Flood Area
Suppose that you own a home that is estimated to be worth $250 000.You live in a flood plain;as a result,the probability that you will lose your home to a flood is 30%.
-(Scenario: Flood Area)Use Scenario: Flood Area.A flood may occur,causing you to lose your entire home.In this case,your expected loss resulting from the flood would be:
A) $250 000.
B) $75 000.
C) $15 000.
D) $100 000.

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Quizplus · Accepted Answer

The expected loss is calculated by multiplying the probability of the event by the value at risk: 0.30 * $250,000 = $75,000.

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