Question

Because Aaron, age 32, is a smoker, he must pay more for life insurance. Given that Company A charges 20% more for smokers, Company B charges 18% more for smokers, Company C charge 25% more for smokers and Company D charges 15% more for smokers, Aaron decides to buy his $250,000 policy from Company B. Which of the following statements is true?(A) Aaron is paying the smallest premium possible with Company B.(B) Aaron is paying $93 more in premiums than he would with Company A.(C) Aaron is paying $129 more in premiums than he would with Company C.(D) Aaron could have chosen any company because the premiums are all the same.

Answer 1

Aaron is paying the smallest premium possible with Company B.

Explanation:

Answer 2

Option A is correct.

Aaron is paying the smallest premium possible with Company B

Explanation:

Lets solve for all four companies and then find the answer.

Company A premium.

Face value = 1.86

Charges = 20% = 0.2

Charges = 0.2*250000 = $50000

Total charge = Charge × face value

= 50000 × 1.86 = $93000

Company B premium.

Face value = 1.86

Charges = 18% = 0.18

Charges = 0.18*250000 = $45000

Total charge = Charge × face value

= 45000 × 1.86 = $83700

Company C premium

Face value = 2.07

Charges = 25% = 0.25

Charges = 0.25*250000 = $62500

Total charge = Charge × face value

= 62500 × 2.07 = $129375

Company D premium

face value = 2.25

Charges = 15% = 0.15

Charges = 0.15*250000 = $37500

Total charge = Charge × face value

= 37500 × 2.25 = $84375

Therefore option A is correct.

Aaron is paying the smallest premium possible with Company B....