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Sorry for asking this but this math problem has got me confused. How do i go about calculating the threshold value of this problem?

Consider that I have an asset worth 2000. There are two independent threats.

The first occurs with probability 0.05 and would reduce the value of the asset to 100, while the second occurs with probability 0.01 and would completely destroy the asset. Both could occur. What would be the threshold value at which buying insurance would be "worthwhile for both parties"?

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    @SimonHayward, This is a hwk question. I found another one with similar format at http://i.stack.imgur.com/Ks6FU.png2015-11-21

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I'm assuming that the two events are mutually exclusive. Let $X$ denote the value of the asset, i.e. $ X=2000-100\cdot 1({\text{event 1 occurs}})-2000\cdot 1(\text{event 2 occurs}) $ then $ E[X]=2000-100\cdot P(\text{event 1 occurs})-2000\cdot P(\text{event 2 occurs}). $

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    @StefanHansen, Hmm, if 1975 is the expected value, then buying it would **not* be worthwhile for any party (since energy is spent to earn $0). So if not 1975, what is the answer?2015-11-21