Which of the Following Statements Describes How Losses Will Be

question 27

Multiple Choice

Which of the following statements describes how losses will be settled if a property insurance policy is written on a replacement cost basis?

• A)Losses are settled without the applicable deductible.
• B)Losses are settled without a deduction for depreciation.
• C)The insurer must replace the damaged or destroyed property in lieu of a cash settlement.
• D)The policy is converted to a valued policy.

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Definitions:

Theta

An option Greek that measures the rate of decline in the value of an option due to the passage of time.

Binomial Model

A financial model used to price options by considering two potential outcomes (up or down) over time for the underlying asset.

Option Valuation

The process of determining the fair market value of options using various models, taking into account factors like the underlying asset, time to expiration, and volatility.

Black-Scholes Model

A mathematical model used to price European-style options, identifying the theoretical fair price for puts and calls based on time and other risk factors.