The owner of a house worth $180,000 purchases an insurance policy at the beginning of the year for a price of $1, 000. The deductible on the policy is $5, 000.
If after 6 months the homeowner experiences a casualty loss valued at $50,000. what is the homeowner's net loss? Assume that the continuously compounded interest rate equals 4.0%.
(a) $6,020
(b) $11,020
(c) $50,000
(d) $51,020
(e) None of the above.