Brandons new living room furniture is destroyed by a fire that started in the kitchen and spread quickly. Fortunately, he has insurance.

a) Brandons insurance indemnifies him based on Actual Cash Value. He paid $4,000 for the furniture two years ago. At the time of the fire loss, the furniture had depreciated by 30 percent. Replacing the new furniture was going to cost $5,500. Ignoring any deductible, how much would Brandon collect from his insurer?

b) Instead, lets imagine that Brandon was using heirloom family furniture in the living room, and has a valued policy that specifically covers the furniture. The heirloom furniture has a current market value of $10,000. If the furniture is destroyed completely in the fire, how much will he collect?