A's Building Is Insured by B Co

question 20

Multiple Choice

A's building is insured by B Co.under a standard policy that covers all loss occasioned by fire.A's business is not doing well,and A figures that if his building is destroyed by fire,he can put part of the insurance proceeds into his business to keep it running.One evening,A starts a fire in his building that subsequently destroys it.In this case

• A)the insurance company is bound to pay the proceeds of insurance to A.
• B)the insurance company is not bound to pay the insurance proceeds at all.
• C)the insurance company is not bound to pay the proceeds of insurance to A,but must pay it to A's family.
• D)the insurance company is bound to pay the insurance proceeds to A's business.
• E)none of the above

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Definitions:

Interest Rate

is the percentage of principal charged by the lender for the use of its money or the return earned on deposit accounts.

Present Value

The current value of a future amount of money or stream of cash flows, discounted at a particular interest rate.

Simple Interest

Interest assessed only on the principal sum, or on the part of the principal that still needs to be repaid.

Principal Amount

The original sum of money borrowed in a loan or invested, distinct from interest or profit earned.