A 46-inch HDTV originally purchased for $5000 has a life expectancy of seven years.It is five years old and has been destroyed in a fire.Today a similar TV would cost $2100.Your cash value policy will

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Since the TV is already five years old, it has depreciated in value. The policy should cover the actual cash value, which is the replacement cost minus depreciation. The accumulated depreciation value of the TV after five years is $3571 ($5000 original cost - ($5000/7)*5). Therefore, the policy will pay $1429 ($5000 original cost - $3571 accumulated depreciation) as settlement in full. This is the best choice as it reflects the actual value of the TV at the time of loss. Option A would overcompensate, Option B would not reflect depreciation, and Option D is not relevant as it doesn't consider the replacement cost of a similar TV available now.

A 46-Inch HDTV Originally Purchased for $5000 Has a Life