Assume that the daily probability of a major earthquake in Los Angeles is 0.07 percent. The chance of your computer center being damaged during such a quake is 5 percent. If the center is damaged, the average estimated damage will be $4.0 million.

1. Calculate the expected loss in dollars.
2. An insurance agent is willing to insure your facility for an annual fee of $25,000. Analyze the offer, and discuss whether to accept it.