The Disadvantage of Actual Cash Value Coverage of Personal Property

question 154

Multiple Choice

The disadvantage of actual cash value coverage of personal property compared to replacement cost coverage is that it

• A)will reimburse you for replacement cost minus estimated depreciation.
• B)will reimburse you for the cash value of a new item.
• C)must be reported as a loss on your tax return.
• D)does not have to be reported as a loss on your tax return.
• E)none of the above.

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Definitions:

Futures Contracts

Financial contracts obligating the buyer to purchase an asset (like a commodity or financial instrument) and the seller to sell the asset at a predetermined future date and price.

Forward Contracts

Financial derivatives that obligate the buyer to purchase and the seller to sell a specific asset at a predetermined future date and price.

Marked-To-Market

Marked-to-market refers to the practice of valuing assets or financial instruments based on their current market prices.

Option Contract

A financial derivative that provides the buyer the right, but not the obligation, to buy or sell an asset at a specified price within a specific time period.