Question

The new owner of a house needs fire insurance coverage for $ 98,000. The annual premium rate is $0.22 per $ 100 for the amount insured. The insurance company agreed to make the cost of the policy 2 1/2 times the annual rate if he purchased a three-year policy. How much would the insurance portion of his monthly PITI payments be to pay for the policy?

Answer 1

$14.97

Step-by-step explanation:

The normal premium cost per year would be:

($98,000 / $100) x $0.22 = 980 x $0.22 = $215.60

Since the insurance company is offering the new owner a discount for purchasing a three year policy, the total cost for the three years would be:

$215 x 2.5 = $539

Now to determine the monthly payment, we divide by 36 months:

$539 / 36 months = $14.97