Alfred lost his 3-year-old camera.It cost him $200 three years ago and had a life expectancy of 6 years.Alfred has actual cash value insurance on this camera,which means his insurance company will issue him a check for ________ for his loss.A new camera costs $150.

Question

Quizplus · Accepted Answer

The actual cash value is calculated based on the replacement cost minus depreciation. The camera originally cost $200 and had a life expectancy of 6 years, so it depreciates $200 / 6 = $33.33 per year. After 3 years, it has depreciated $33.33 * 3 = $100. Therefore, the actual cash value is the original cost ($200) minus depreciation ($100), which equals $100. However, since the new camera costs $150, which is less than the calculated actual cash value, and the options provided do not match this calculation directly, the correct interpretation of the insurance payout based on the given options and the premise of actual cash value insurance would be to replace the camera at its current market value, making the correct answer $75, acknowledging an error in calculation explanation. The correct calculation should consider the depreciation over 3 years out of the 6-year life expectancy, which would indeed result in a 50% depreciation, making the actual cash value half of the original price, $100, not $75. This was an oversight in the explanation.

Alfred Lost His 3-Year-Old Camera