Which of the following statements about the replacement cost provision of the Homeowners 3 policy is true?
A) It applies to personal property losses only.
B) Except for small losses, the insured must repair or replace the damaged property in order to receive full replacement cost.
C) The insured is required to carry an amount of insurance equal to 100 percent of the replacement value of the insured property.
D) Loss settlements are equal to 50 percent of the value of the loss if the insured is carrying less than the required amount of insurance.
Question 2
Baker Corp is required by a debt agreement to maintain a current ratio of at least 2.5, and Baker's
current ratio now is 3.
Baker wants to purchase additional inventory for its upcoming Christmas
season, and will pay for the inventory with short-term debt. How much inventory can Baker
purchase without violating its debt agreement if their total current assets equal 15 million?
A) 4.50 million B) 1.67 million C) 0.50 million D) 6.00 million
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