Your laptop costed you $500 five years ago (i.e. it is a 5-y old laptop) when you purchased it. It was lost and the loss is covered by your homeowners insurance. Assume there is no deductible in your home insurance policy (which means you most likely pay a higher premium than a policy with a deductible, all else being equal).

The laptop now costs $720 to replace and it has an estimate life of 8 years.

Part A. If using the Actual Cash Value method, how much is the estimate total depreciation for this 5-y old laptop?

a. $312.5

b. $500

c. $220

d. $450

Part B. How much will the insurance pay you, if using Actual Cash Value?

a. $500

b. $450

c. $270

d. $720