1. Clyde has owned his home for ten years. When he purchased it for $178,000, he bought a $160,000 homeowner's insurance policy. He still owns that policy, even though the replacement cost of the home is now $300,000.

a) If Clyde suffered a $20,000 fire loss to the home, what dollar amount of the loss would be covered by his policy?

b) How much insurance on the home should Clyde carry to be fully reimbursed for the fire loss?