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Oxnard Petro Ltd. is buying hurricane insurance for its off-coast oil drilling platform. During the next five years, the probability of total loss of only the above-water superstructure ($200 million) is .25, the probability of total loss of the facility ($900 million) is .25, and the probability of no loss is .50. Find the expected loss. (Input the amount as a positive value.)

Oxnard Petro Ltd. is buying hurricane insurance for its off-coast oil drilling platform. During the next five years, the probability of total loss of only the above-water superstructure ($200 million) is .25, the probability of total loss of the facility ($900 million) is .25, and the probability of no loss is .50. Find the expected loss. (Input the amount as a positive value.)

MATLAB: An Introduction with Applications
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
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**Title: Calculating Expected Loss for Offshore Oil Platform Insurance** **Scenario:** Oxnard Petro Ltd. is purchasing hurricane insurance for its offshore oil drilling platform. The insurance covers the possible loss scenarios over the next five years: 1. **Total Loss of Only the Above-Water Superstructure:** - Value: $200 million - Probability: 0.25 2. **Total Loss of the Entire Facility:** - Value: $900 million - Probability: 0.25 3. **No Loss:** - Probability: 0.50 **Objective:** Calculate the expected loss. (Note: Input the amount as a positive value.) **Expected Loss Calculation:** Expected Loss = (Probability of Loss 1 * Loss 1 Value) + (Probability of Loss 2 * Loss 2 Value) + (Probability of No Loss * No Loss Value) - Probability of Loss 1: 0.25 - Loss 1 Value: $200 million - Probability of Loss 2: 0.25 - Loss 2 Value: $900 million - Probability of No Loss: 0.50 - No Loss Value: $0 million **Formula Application:** Expected Loss = (0.25 * 200) + (0.25 * 900) + (0.50 * 0) Expected Loss = 50 + 225 + 0 Expected Loss = $275 million **Conclusion:** The expected loss for Oxnard Petro Ltd.'s insurance on their offshore oil platform is $275 million.
Transcribed Image Text:**Title: Calculating Expected Loss for Offshore Oil Platform Insurance** **Scenario:** Oxnard Petro Ltd. is purchasing hurricane insurance for its offshore oil drilling platform. The insurance covers the possible loss scenarios over the next five years: 1. **Total Loss of Only the Above-Water Superstructure:** - Value: $200 million - Probability: 0.25 2. **Total Loss of the Entire Facility:** - Value: $900 million - Probability: 0.25 3. **No Loss:** - Probability: 0.50 **Objective:** Calculate the expected loss. (Note: Input the amount as a positive value.) **Expected Loss Calculation:** Expected Loss = (Probability of Loss 1 * Loss 1 Value) + (Probability of Loss 2 * Loss 2 Value) + (Probability of No Loss * No Loss Value) - Probability of Loss 1: 0.25 - Loss 1 Value: $200 million - Probability of Loss 2: 0.25 - Loss 2 Value: $900 million - Probability of No Loss: 0.50 - No Loss Value: $0 million **Formula Application:** Expected Loss = (0.25 * 200) + (0.25 * 900) + (0.50 * 0) Expected Loss = 50 + 225 + 0 Expected Loss = $275 million **Conclusion:** The expected loss for Oxnard Petro Ltd.'s insurance on their offshore oil platform is $275 million.
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