A company's losses of a particular type are to a reasonable approximation normally distributed with a mean
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Question:
A company's losses of a particular type are to a reasonable approximation normally distributed with a mean of $120 million and a standard deviation of $30 million. The 1-year risk-free rate is 4%. Determine the cost of the ff a contract that pays $100 million in 1 years' time if losses exceed $150 million. Please discuss results.
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