ABC Company Insured Its Building on a Replacement Cost Basis

question 10

Multiple Choice

ABC Company insured its building on a replacement cost basis for $700,000 under a property insurance policy that included an 80 percent coinsurance clause.The building had a replacement cost of $1 million when it sustained a $40,000 loss.How much will ABC Company receive from its insurer,assuming no deductible applies?

• A)$33,333
• B)$35,000
• C)$36,000
• D)$40,000