Question

Lulu and City Center both own an identical storage building in Sitra valued at BD 10.000. It was estimated that there is a 8 percent chance in any year each storage will be destroyed (loss to either of the building are independent). Both Lulu and City Center agreed to share the risk and agrees to pay equal amount of share in case of a loss. Calculate the expected loss for each of the parties involved. Estimate the objective risk before pooling. Estimate the objective risk as a result of the pooling.

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