Renee Is Risk Manager of XYZ Company

question 28

Multiple Choice

Renee is risk manager of XYZ Company.She purchased a Commercial Package Policy for her company and added one optional coverage.This option suspends the coinsurance clause and substitutes a new agreement covering any loss in the same proportion that the limit of insurance purchased bears to a value specified in the declarations.This provision is known as

• A)waiver of inventory coverage.
• B)inflation guard coverage.
• C)agreed value coverage.
• D)replacement cost coverage.

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Definitions:

Debt

An amount of money borrowed by one party from another, under the condition of repayment with interest.

Interest Tax Benefit

The financial advantage gained through deducting interest payments on debt from taxable income.

MM Model

Modigliani-Miller Model; a theory on capital structure that suggests the market value of a firm is determined by its earning power and the risk of its underlying assets.

Tax-Deductibility

Pertains to expenses that can be subtracted from gross income to reduce the total taxable income, thereby lowering the amount of tax owed.