Te Assignment 1. In the lecture/class problem we calculated the PWC for the THREE alternatives. Alternative PWC Do nothing Alt.1 $15K modification Alt.2 $20K modification Alt.3 a. Convert the PWC values to UAC for the three alternatives (show calculation). b. Give a suggested annual insurance premium that may be accepted to your boss. (we talked about it in the lecture) 2. An engineer decided to make a careful analysis of the cost of fire insurance for his $200,000 home. From a fire rating bureau, he found the following risk of fire loss in any year Outcome No fire loss $10,000 fire loss $40,000 fire loss 200,000 fire loss $26.37K $20.84K $20.00K Probability 0.986 0.010 0.003 0.001 a. Compute his expected fire loss in any year b. He finds that the expected fire loss in any year is less than the $550 annual cost of fire insurance. In fact, an insurance agent explains that this is always true. Nevertheless, the engineer buys fire insurance. Explain why this is or is not a logical decision